₹10,000 Monthly Investment for 5 Years: Comparing the Final Corpus from a Hybrid Fund vs. a Recurring Deposit

Why do some people still choose RDs over mutual funds when the returns differ? You’re saving ₹10,000 every month, hoping to build a decent corpus. But where should this money go? Recurring deposits look safe. Hybrid mutual funds look rewarding. One is slow but steady. The other? A little shaky, but faster.

That’s the confusion many investors face. This article breaks down both paths if you’re in the same boat. And not on the surface. We’ll go deep—numbers, logic, pros, cons, and examples.

Where Will ₹10,000 Per Month Take You in 5 Years?

To make this simple, we are looking at two popular investment options:

• Recurring Deposit (RD): safe, fixed interest, but low return.
   
• Aggressive Hybrid Mutual Fund: a mix of equity (for growth) and debt (for stability).

Let’s decode both with real numbers.

How Recurring Deposits Work and What to Expect

Most Indian banks offer RDs with 6% to 7% per annum interest rates. Let’s say you invest ₹10,000 every month.

At 6.7% annual interest, after 5 years, you’ll get: This is before tax. After tax, your net earnings will be even lower.

Why Do People Still Choose RDs?

• Bank-backed, so no risk.
• Easy to open and track.
• Fixed returns, no stress.

But here’s the problem. Inflation eats into your returns. If inflation is around 6%, you’re only beating it by 0.7%. That’s not wealth building. That’s just preserving money.

Let’s say you decide to increase your investment to ₹15,000 monthly. Your maturity amount (at 6.7%) will be around ₹12,24,000. But even that isn’t impressive if you compare it with mutual fund growth.

Hybrid Mutual Funds: Risk Balanced, Returns Improved

Aggressive hybrid funds invest about 65%–80% in equity and the rest in debt, so they offer growth and safety.

Now, assume a 9% annual return. After 5 years, this is what you get:

That’s around ₹75,000 to ₹1,34,000 more than RD. That’s a big difference in 5 years.

Why Hybrid Funds Perform Better

• Equity grows over time.
   
• Debt protects in market crashes.
   
• Lower risk than full equity funds.
   
• Suitable for 3–5 year goals.

Let’s take another example:

Read More -   Calculate Fixed Deposit Interest

Here’s the magic. Compounding adds up. Every year, your ₹10,000 or ₹12,000 does more work.

Tax Matters: RD vs. Hybrid Fund

Here’s where many make mistakes. They compare returns, not post-tax returns.

Suppose you're in the 30% tax bracket. The interest from RD gets taxed heavily. In hybrid funds, only long-term capital gains over ₹1,00,000 are taxed at 10%. That means you keep more in hand.

Let’s break this with a ₹9,50,000 corpus:

• RD: Interest = ₹2,50,000 → Tax = ₹75,000 (at 30%)
• Hybrid Fund: Gain = ₹2,50,000 → Tax = ₹15,000 (on ₹1,50,000)

You save ₹60,000 in taxes. That’s not small change.

What's the Smarter Option for 5-Year Investment Goals?

RD:

Good for extremely risk-averse people. Or for short-term goals under 2–3 years. You know the amount. No fluctuation.

Hybrid Fund:

Better for medium-term goals. Let’s say you want to buy a car, fund a wedding, or make a home down payment in 5 years. Hybrid funds might be your friend. They’re not as risky as equity. But not as boring as RD.

Also, let’s add inflation to the story. If inflation stays at 6%:

Higher real return means actual growth. Not just illusion.

Strategies to Use Both RD and Hybrid Funds

You don’t need to choose just one. Use both.

Here’s how you can split:

This combo helps balance growth with peace of mind.

Also Read -  What is a Flexi Cap Fund

You can also follow strategies like Cost Averaging, STP (Systematic Transfer Plan), and SIP Top-Up to get more from hybrid funds. These methods manage volatility and help during market dips.

What Happens If You Increase the Time?

Let’s compare same ₹10,000 SIP for 10 years now:

The longer you stay, the bigger the gap. In 10 years, hybrid beats RD by ₹3,65,000. That’s compound growth.

Conclusion

Recurring deposits are calm. Hybrid funds are clever. Choose based on your comfort, timeline, and what you expect at the end. If you want more from your money without full risk, hybrid funds give you a real shot.

If you want help planning your investment split, just ask. We’ll break it down, Indian-style, rupee by rupee.

FAQs

1. Is investing in aggressive hybrid funds for 5 years safe?
Yes, for most investors with moderate risk tolerance, these funds balance equity and debt. They're ideal for goals in the 3—to 5-year range.

2. What happens if I miss a SIP in a hybrid fund?
Nothing major. Mutual funds are flexible. If you skip a SIP, your fund won’t stop. Just try to be regular to get the best results.

3. Can I withdraw money early from a hybrid fund?
Yes, you can redeem anytime. But if you do it within 1 year, you may pay a small exit load (around 1%).

4. Which banks offer the best RD interest rates in India?
Small finance banks and NBFCs like Jana, Suryoday, or AU Small Finance Bank often offer higher RD rates than large public sector banks.

5. Do hybrid funds guarantee returns like RDs?
No. They depend on market performance. But over the past five years, they’ve historically given 9% to 12% returns in India.

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