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Are Fixed Deposits safer than debt focused mutual funds?

By Finserv MARKETS - Aug 26,2019
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Are Fixed Deposits safer than debt focused mutual funds

The best investment options guarantee investors substantial returns as well as high security of their funds investments. While trading in the equity markets is always the most preferred option for those looking to earn high returns, it’s not always the most secure form of investment. Equity markets are extremely prone to market risks and stocks fluctuate owing to a variety of factors including social and economic conditions, political instability both regionally and globally. As a result, safe investment options are usually sought out by people when the economic condition looks bleak or even just to ensure the security of their funds.

While mutual funds refer to investment portfolios that are spread out over a variety of investments in order to gain the best returns while also ensuring the highest levels of security; debt focussed mutual funds invest more in debt instruments than equity instruments. These have been considered historically safer than conventional mutual funds which invest in both debt and equity instruments, but in recent times, the situation has changed. Fixed deposits on the other hand have always been considered as safe investment options, since they involve the investor placing their funds for a fixed tenure and receiving their lump sum at the end of said tenure.

Investing in fixed deposits is an option senior citizens can explore, since they are especially beneficial for them. Senior citizens are generally more in search of security rather than gaining high returns and this makes fixed deposits a very good investment plan for that demographic group. Investing in fixed deposits on Finserv MARKETS helps investors avail 8% interest rates which can go up to 8.95% for senior citizens.

Read on to learn about whether fixed deposits are a safer investment option as compared to debt focussed mutual funds.

1. Assured returns:

In recent times, especially in light of defaults by huge companies like IL&FS, debt focussed mutual funds are beginning to appear like a risky investment option. Investors have suffered owing to these companies going under, and at such times, fixed deposits do appear to be the best investment option. When you invest in a fixed deposit, the government acts as the guarantor for your funds. This means that even if the bank does not show good economic performance or even if it shuts down owing to a lack of funds, the government will ensure that the investor receives their funds. This is the reason that fixed deposits are considered safe investment options, since the returns are assured. If you invest in fixed deposits on Finserv MARKETS, you are assured higher returns that are guaranteed with the stable 8.40% interest rate.

2. Market risks:

As an investment plan, fixed deposits were long considered safe investment options because they are absolutely unaffected by market risks unlike other investment plans. While investment instruments such as equity or even conventional mutual funds are affected by fluctuating market conditions whether regionally or globally and even political stability or the lack of it, fixed deposits are not affected at all. The fixed deposit tenure is decided at the time of investment, and the depositor is guaranteed payment of funds as soon as the tenure is over. Investing in a fixed deposit on Finserv MARKETS allows you to choose a tenure that ranges from 12 months to five years, and you can choose the amount of time you wish to keep your funds growing for.

Liquidity:

Though safe investment options, fixed deposits are not known to be the most liquid. Since the funds are locked up for a fixed tenure, it is difficult to access the funds without attracting a penalty for preclosure. However, debt focussed mutual funds are much more liquid since the securities you hold can be sold off quite easily in the debt market. This can be especially useful, in times of unexpected financial emergencies when there is a cash crunch you need to account for.

The best investment options are always decided in accordance to an investor’s requirements. The amount of time they wish to invest for, depending upon their goals for the investment is one of the major determinants behind the investment instruments being opted for. The risk of investment differs from instrument to instrument, but fixed deposits have majorly been considered a safe investment option which offer lower returns as compared to others.

Debt focussed mutual funds, while riskier than fixed deposits, offer significantly higher returns and are thus considered among the best investment options. As mentioned above, debt focussed mutual funds took a beating earlier this year and threats of defaults are causing people to consider shifting their investment plan. However, it is important to remember your individual goals before you choose an investment plan.

Fixed deposits provide the guarantee that mutual funds cannot, since they are guaranteed by the government. Once you have chosen the tenure of your fixed deposit, you are assured returns. If you invest in fixed deposits on Finserv MARKETS, you can even process everything online and stay updated on the status of your deposit in real time. This offers you unprecedented transparency in managing your investments.

Finserv MARKETS, from the house of Bajaj Finserv, is an exclusive online supermarket for all your personal and financial needs. We understand that every individual is different and thus when you plan to achieve your life goals or shop for the gadget of your dreams, we believe in helping you Make it Happen in a few simple clicks. Simple and fast loan application processes, seamless, hassle-free claim-settlements, no-cost EMIs, 4 hours product delivery and numerous other benefits. Loans, Insurance, Investment and an exclusive EMI store, all under one roof – anytime, anywhere!

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Bajaj Finserv Direct Limited ("BFDL"), erstwhile Bajaj Financial Holdings Limited is a registered corporate agent of Bajaj Allianz Life Insurance Company Limited and Bajaj Allianz General Insurance Company Limited under the IRDAI composite registration number CA0551 valid till 10-Apr-2021. BFDL also renders services to Bajaj Finance Limited (‘BFL’) and Bajaj Housing Finance Limited (‘BHFL’) (referred hereinafter as ‘Lending Partner’) in sourcing of customers, providing preliminary credit support activities, fulfilment services and post-acquisition customer services related to lending business. Registered Office: Bajaj Auto Limited Complex, Mumbai – Pune Road, Akurdi, Pune – 411 035 CIN: U65923PN2014PLC150522