Fixed Deposit vs SIP

In spite of the availability of other investment options, fixed deposits have remained as one of the most popular investment instruments in India for decades. Still today, FDs constitutes 58% of all bank deposits. 

In today’s volatile and uncertain market conditions, fixed deposits score over market-linked investments such as equity mutual funds, stocks, ELSS and others in terms of assured high returns, reliability, flexibility and liquidity.

A fixed deposit available on Finserv MARKETS gives you returns as high as 8.70%; going up to 9.05% for senior citizens. Applying for a fixed deposit online at Finserv MARKETS is fast, easy and seamless.

What is a Bank Fixed Deposit?

A fixed deposit (FD), also known as a term deposit, offers assured returns on money deposited in a bank or NBFC. Investors agree upon a fixed rate of return and tenure before investing in a fixed deposit. At the end of the term, you can withdraw the money plus interest compounded according to the rate of return.

Unlike ULIPs, mutual funds, equities or NPS, FD returns are not market-linked; therefore investors don’t have to worry about losing their money. You can also enjoy tax savings under Section 80C on FDs if they are invested for a minimum period of 5 years.

Benefits of Fixed Deposits

  • Higher returns

Since the RBI has reduced interest rates for popular saving schemes such as Public Provident Fund (PPF) and National Savings Certificates (NSC) from 8% to 7.9%, fixed deposits are gaining more favour among investors.

In 2018, a 1-year bank FD earned more than 6.5% yearly returns while stocks, real estate, and equity and debt mutual funds could hardly provide more than 7% returns. The RBI has also reduced the interest rates on Senior Citizens Saving Scheme and Sukanya Samridhi Yojana. In comparison, fixed deposits available on Finserv MARKETS assures you return up to 8.7% and senior citizens get special interest rates too.

  • Immune from volatile markets

While equity mutual funds and stocks have witnessed extreme volatility in recent times and even seen returns falling down to negative, fixed deposits and gold have outshone and outperformed the market to provide consistent and risk-free returns.

  • Flexibility and liquidity

While other risk-free investment tools with guaranteed returns have long lock-in periods, fixed deposits offers high flexibility and easy liquidity. You can invest in a FD with a tenure ranging from 1 week to 10 years but at the same time you can liquidate the same in any emergency situation. Alternatively, you can also take loans with the fixed deposit as collateral up to a certain specified amount.

FD vs. SIP – Which One is a Better Investment Option?

  • Returns

Though mutual fund SIPs are market-linked and provides scope for higher returns, there is a certain degree of risk involved. If the equity market underperforms and there is an economic downturn, SIP investors may have to suffer losses depending upon the extent of their exposure.

In 2018, FDs provided more than 6.5% returns while Large Cap Equity Mutual Funds ELSS Mutual Funds provided negative returns of (-0.7%) and (-7%) respectively. 

  • Amount of deposit

People who prefer systematic investment plans (SIPs) in mutual funds argue that fixed deposits require a high initial investment, whereas SIPs can be done by making small daily, weekly, fortnightly, monthly, quarterly, half yearly and annual contributions.

The argument is true but only in case of a lump sum fixed deposit. If an investor doesn’t prefer lump sum FD investment, he can go for a recurring deposit that offers the same returns applicable to fixed deposits. With recurring deposits investors can make risk-free investments with assured returns which a mutual fund SIP cannot provide.

  • Much easier to open and operate

Compared to a SIP which requires you to open a demat account, an FD is much easier to start and operate. Fixed deposits also give you the flexibility in choosing the tenure, which can be between 7 days to 10 years.

  • Tax relief

While returns from investments on stocks and equity mutual funds through SIPs are subject to long-term capital gain (LTCG) tax, fixed deposits interest income up to Rs. 40,000 is exempt from tax deducted at source (TDS). Earlier interest income only up to Rs. 10,000 was exempt from TDS. 

Features of FD on Finserv MARKETS

Finserv MARKETS is one of the fastest growing and most trusted NBFC in India. FDs available on Finserv MARKETS are AAA-rated, best-in-class and available at attractive interest rates.

  • Fixed deposits should be a minimum of Rs. 25,000.

  • FDs are rated FAAA/Stable by CRISIL and MAAA/Stable by ICRA. This means complete safety of returns on investment.

  • Attractive and assured rates of interest for your money to grow periodically.

  • Flexibility to choose FD tenure from 12 to 60 months.

  • Investors can also open a fixed deposit account offline in over 600 locations in India.

  • Easy online access to account details through Finserv MARKET’s customer portal -Flexibility of payment option through electronic or physical modes.

  • Special rates for senior citizens, existing customers and group employees.

What are the different types of fixed deposits?

Fixed deposits are of two types: cumulative and non-cumulative.

  • Cumulative

In a cumulative FD, interest is compounded either quarterly or annually. The entire amount is then paid out on maturity. Cumulative FDs offer higher returns compared to non-cumulative fixed deposits.

  • Non-cumulative

In a non-cumulative fixed deposit, interest pay-outs are made periodically according to the choice of the investor. Non-cumulative FDs are ideal for meeting regular living expenses.

FAQs

Who can invest in a FD?

Any resident citizen of India can invest in a fixed deposit. There are no age restrictions to open a fixed deposit. In case of minors, it can be opened through a legal and natural guardian.

When you should invest in fixed deposit?

A fixed deposit is the right investment option for you if are looking for diversifying your portfolio and spreading your risk. By investing in an FD, you can enjoy fixed returns up to 9% without carrying any risk. If you are worried about volatile equity market conditions, you can invest in an FD to mitigate risks. Fixed deposits are also ideal for someone looking for flexibility in investment tenure (7 days to 10 years) and easy liquidity.

How to choose the right FD scheme?

You can choose the right fixed deposit depending upon your investment goal, amount and tenure. The following factors should be kept in mind before selecting the right FD scheme:

  • Rate of interest

  • Rating or credibility of the FD provider

  • Tenure

  • How often interest pay-out is made

  • Rate of penalty for premature withdrawal

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