SIP vs FD: What a 15-Year Back-Test Actually Shows

₹10,000 per month for 15 years is an investment of ₹18 lakh. In an average equity mutual fund returning 12% CAGR, it becomes ₹50.45 lakh. In a fixed deposit averaging 7.25%, it becomes ₹32.4 lakh. The SIP produces ₹18 lakh more — that is not a small gap.

Why the gap exists

Equity is a claim on corporate earnings. Indian GDP grew ~7% annually in nominal terms over the last 15 years; corporate earnings grew faster; equity returns (Nifty TRI) averaged 13-14%. Fixed deposits fund bank lending and are capped by RBI repo rate plus a small spread. FDs can never structurally beat equity over 10+ year horizons.

Tax makes the gap wider

Equity LTCG (held >12 months) is taxed at 12.5% on gains above ₹1.25L per year. On the ₹32.4L gain from the SIP, you pay roughly ₹3.9 lakh tax — net ₹46.5L. FD interest is fully taxable at your slab. A 30% taxpayer earning ₹14.4L gain pays ₹4.3 lakh tax — net ₹28L.

Net of tax: SIP ₹46.5L, FD ₹28L. Gap widens to ₹18.5L.

Volatility is the real cost

That 12% average hides ugly years. In 2008 equities fell 52%. In 2020 they fell 35%. If you panic-sold during those drawdowns, your actual return was far lower than the headline CAGR. FD has no drawdown. For most investors, the key question is not "which returns more" but "which can I stick with".

When FD still wins

• Goal within 3 years — equity has too much variance for short horizons
• Retirees drawing down corpus — capital preservation matters more than growth
• Emergency fund — liquidity and stability beat returns
• Senior citizens — SCSS at 8.2% + tax deductions often beats both

The practical answer

For any goal more than 7 years out, default to equity SIP. For 3-7 year goals, split 60/40 equity/debt. For under 3 years, stay in FD/short-duration debt funds.

Run your own numbers with the SIP vs FD Calculator.