Bonds Vs Fixed Deposits

Bonds and Fixed Deposits (FDs) are both investment options that involve lending money, but they have some key differences. The choice between FDs and bonds depends on various factors, including your financial goals, risk tolerance, and investment horizon. Read on to learn more about the key difference between the two.

Fixed Deposits and Bonds: Head-to-head Comparison


Fixed Deposits



Banks, post offices, and non-banking financial institutions

PSUs, government bodies, municipalities, and private companies



Varies depending on the issuer (Government bonds have lower risk)


Fixed, predetermined interest rate

Can potentially offer higher returns than FDs


Possible with penalties for premature withdrawal

Depends on market conditions and bond terms


Fixed, predetermined

Varies (short-term to long-term)

Market value fluctuation

Stable (principal amount remains constant)

Can fluctuate based on interest rates and market conditions

Interest payments

Periodic interest payments or lump sum at maturity depending on your choice

Periodic interest payments or lump sum at maturity based on the bond terms

Investment horizon

Suitable for short to medium-term goals

Suitable for medium to long-term goals


The choice between Fixed Deposits (FDs) and Bonds can be subjective and depends on 

various factors such as your personal financial goals, risk appetite, and time horizon. Both options have their own merits, and the decision ultimately hinges on your specific circumstances and preferences.


It might be worthwhile to carefully evaluate the features of each, considering factors like your investment goals, need for liquidity, and tolerance for market fluctuations.



The information provided by BFDL is related to the rates provided by Banks and Deposit taking NBFCs as available from public domain and under no circumstances is intended to be source of advice or recommendation of any financial investment advice or endorsement of any sort. BFDL disclaims any responsibility or liability regarding inaccuracies, omissions, mistakes etc. as well as offers and use of such information set out is entirely at the User’s own risk and User should exercise due care prior taking of any decision, on the basis of information mentioned hereinabove. Display of any intellectual property along with the related product information does not imply BFDL’s partnership with the owner of the intellectual property of such products and is solely for the purpose of information, unless otherwise provided by BFDL.


Which investment option is generally considered safer?

Government bonds are often considered low-risk, while corporate bonds carry varying degrees of risk depending on the issuer's creditworthiness. FDs, on the other hand, are considered to have low to moderate risk. Also, bank FDs are insured up to ₹5 Lakhs by DICGC.

Can I trade bonds in the secondary market?

Yes, bonds can be bought and sold in the secondary market before maturity, providing liquidity to investors.

Can I redeem my investment before maturity in bonds and FDs?

Bonds can be sold in the secondary market before maturity, but the selling price may be affected by market conditions. In the case of FDs, premature withdrawals are allowed with penalties, while others offer reduced interest rates for early exits.

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