Business

Is FD Better Than Mutual Funds?

By
OB Bureau

There are a variety of investment instruments available in the market. FDs and mutual funds are two of the most popular financial instruments considered for investment. Both of them have their own set of benefits and risks. Depending on your risk appetite, the expectation of returns, current financial capacity, and other factors, it is best to choose one accordingly. Fixed deposits are a traditional choice of investment for many.

According to the RBI research that was released in June 2020, nearly 53% of the average household financial assets are invested in fixed deposits. Moreover, there has also been an increase in the number of fixed deposit accounts. One of the main reasons why many individuals choose fixed deposits is that it is backed by the government and has negligible risk compared to other options in the market. On the other hand, mutual funds offer a diverse portfolio and have the capacity to offer higher returns in comparison.

Returns Provided

Typically, fixed deposits have a fixed interest rate. One main cause of concern for senior citizens who primarily invest in FD is the declining rate of interest. Over the last 25 years, there has been a decrease in the interest rate observed. One of the reasons that have accelerated this decrease in interest rates has been the pandemic. Bajaj Finance FD rates are the highest currently among the other Banks and NBFCs. Moreover, this decrease contributed negligibly to overcome the increasing prices due to inflation. However, a distinguishing aspect of FD from mutual funds is that it offers guaranteed returns irrespective of how the stock market is performing.

When it comes to mutual funds, there is a higher potential to gather higher returns. In addition, it is also possible to invest in mutual funds with much lesser investment. Different types of mutual funds provide different rates of return. For instance, equity-based mutual funds usually provide higher returns in comparison.

Benefits

Each of these financial instruments has its own set of benefits. Let us have a look at the benefits of both mutual funds and fixed deposits.

1. Benefits of Mutual Funds

Mutual funds have multiple benefits such as the following.

  • The risks that come along with investing in the stock market such as equity are reduced. This is primarily because of the diversification that happens with mutual funds.
  • The minimum investment required is much lower compared to other investment options available.
  • The returns offered are typically high, especially from equity-based mutual funds.
  • The funds are managed by professionals who are financial experts.
  • The surplus amount is easily allocated to the existing portfolio with the help of top-ups.
  • Another key benefit is that there are various modes of investments such as lump sum plan, systematic transfer plan, and the systematic investment plan.

2. Benefits of FD

When it comes to fixed deposits, there are certain key benefits too. Here are some of these benefits.

  • Fixed deposits are backed by the government and hence come with almost zero risks.
  • A guaranteed rate of return is provided by fixed deposits.
  • According to Section 80C of the Income Tax Act, you are entitled to tax deductions amounting up to Rs. 1.5 Lakhs for a fixed deposit that is over 5 years in tenure.
  • The interest earned by senior citizens on fixed deposits of up to Rs. 50,000 are exempt from tax as per Section 80C of the Income Tax Act.

In Conclusion

Both FD and mutual funds are popular choices of investment. Each of them has its own benefits and may suit different individuals. So, it is important to first assess your financial goals, assess your current financial capacity, and further evaluate your expectations of returns before investing in either of them. For instance, if you have a low-risk appetite and would like to have fixed returns, a fixed deposit might be a better option. On the other hand, if you would like to gain more returns, mutual funds may suit you better. Analysing these aspects can help you make an informed decision regarding your investment.

OB Bureau

Recent Posts

PM Narendra Modi Tweets His Excitement Over Attending ‘Odisha Parba 2024’ Today

New Delhi/Bhubaneswar: Prime Minister Narendra Modi will participate in the ‘Odisha Parba 2024’ programme on…

November 24, 2024

SEBI In Dock As Bribery Case Involving Gautam Adani, His Officials Reaches Supreme Court

New Delhi: A fresh application was filed before the Supreme Court on Sunday urging the…

November 24, 2024

[Watch] Odisha CM Disburses Subhadra Assistance To Over 20 Lakh Beneficiaries In 3rd Phase

Bhubaneswar: Chief Minister Mohan Majhi disbursed the first instalment of Rs 5,000 under Subhadra Yojana…

November 24, 2024

Low Pressure Over Bay Of Bengal Becomes Well Marked; Will It Intensify Into Cyclone?

Bhubaneswar: The low-pressure over east Equatorial Indian Ocean (EIO) and adjoining southeast Bay of Bengal…

November 24, 2024

Here’s Why Rishabh Pant Gifted Scooters To Two Factory Workers

New Delhi: Cricket fans were left gasping for breath in December 2022 when Indian wicketkeeper-batter…

November 24, 2024

ASI To Submit Schedule For Ratna Bhandar Repair Work Today: Odisha Minister

Puri: Repair work of Shree Jagannath temple's Ratna Bhandar in pilgrim town of Puri will…

November 24, 2024

Odisha Activists Rescue 20-Yr-Old Married Woman Trafficked To Maharashtra, Raped For 14 Days

Bhubaneswar: A 20-year-old married woman, allegedly kidnapped from Odisha's Nabarangpur and then raped, and held…

November 24, 2024

India Counted 640 Million Votes In A Day, California Still Counting: Elon Musk Takes Jibe At US Poll Process

New York: Slamming the prolonged delays in some parts of United States, Elon Musk on…

November 24, 2024