FD Calculator vs SIP Calculator - Know the Similarities and Differences
FD Calculator vs SIP Calculator (Source: Shutterstock)
When it comes to financial planning, savings and investment are crucial. However, financial planning can be complex, especially when selecting where to invest and how to invest. Your choice of investment crucially depends on two things – your risk appetite and financial goals.
Your financial goals are determined by figuring out why you are investing in the scheme and what you are expecting out of it. It can be financial security or high returns. Your risk appetite determines how willing you are to take risks and whether you can afford to take them.
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Nevertheless, fixed deposit and SIP mutual funds are two investment-cum savings schemes that you can choose between depending on your financial goals and risk appetite. Whichever you choose, you can consider using an FD calculator and SIP calculator online to make investment decisions easy.
Before we discuss the two calculators in length, let's take a moment to understand these savings cum investment schemes.
What is a Fixed Deposit Scheme?
A fixed deposit scheme is a savings scheme offered by leading banks and Non-Banking Finance companies. It comes with a tenure that can begin from 7 days and last for as long as 10 years. Unlike some of India's most prominent savings schemes, fixed deposit requires the investor to make a one-time investment. This investment then earns an interest yearly, helping the induvial fasten wealth generation. The interest varies from bank to bank. However, you can choose the investment tenure and investment amount as per your financial goals and convenience (however, it should meet the minimum investment criteria formulated by the bank)
A fixed deposit scheme is ideal for individuals who look for guaranteed returns and want to stay away from assets carrying market volatility. So, if you are someone who prioritizes investment safety over returns, a fixed deposit scheme should be a suitable choice for you.
What Does an FD Calculator Do?
An FD calculator is an online tool which calculates the maturity amount your fixed deposit account will accumulate. The maturity amount comprises the investment amount, interest and interest on interest (compound interest).
What is a Systematic Investment Plan?
A systematic Investment is a mode of investment in mutual funds. This mode requires the investor to contribute a fixed amount every month to the scheme. The invested amount is used to invest in various asset classes of mutual funds. The best thing about SIP is that the investment manager handles the investment portfolio. They invest in the best assets per their expertise and consider your investment preferences and goals. As SIP invests in market-related instruments, the investment is subjected to market risks. However, these risks are averaged out by making adjustments to the units purchased.
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SIP is ideal for beginners who are just starting out their investment journey. It is also ideal for individuals looking to earn high returns in the long term.
What is an SIP Calculator?
An SIP calculator is a tool that computes the maturity amount you will be getting at the end of the tenure. An SIP calculator computes results on the basis of information entered. The information can include investment amount, investment tenure and expected rate of return.
Similarities between an FD calculator and an SIP calculator
Here are some similarities between an FD calculator and an SIP calculator:
- Both the FD calculator and SIP calculator compute the maturity amount on the basis of the information provided.
- An FD calculator and a SIP calculator are easy to use and are widely available online.
- SIP calculator and FD calculator require the individual to enter details such as an investment amount, investment tenure and rate of interest/ interest rate.
- Both calculators use the compound interest formula to calculate returns.
Differences Between an FD Calculator and SIP Calculator
Here are some differences between an FD calculator and an SIP calculator online.
- The algorithms of the FD calculator and SIP calculator online are designed to compute results based on that particular investment cum savings plan.
- Even though both calculators require you to enter the rate of return, this rate differs. The bank informs you about the fixed deposit interest rate you will be getting. However, with SIP, the rate of return is something you have to speculate on the basis of your research and market analysis.
Final Thoughts
So, which scheme are you planning to invest in? SIP or FD?
It is highly advisable to use an FD calculator or an SIP calculator online before you begin investing. They will provide you with a clear picture of the amount you will have in hand and help you do your financial planning easily.