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Mutual Fund vs Fixed Deposit is an argument that has existed for as long as both these investment options have been on the market. While one offers you substantial returns, the other can provide you with a guarantee of secure returns. One heavily depends on the equity market, while the other is unaffected by market fluctuations. 


Recently, FDs have been giving mutual funds a run for their money, with FD providers introducing new, competitive rates that can help you build your corpus exponentially and inject stable returns into your portfolio. Hence, here is where you can settle the debate on FD vs Mutual Funds.

Difference Between FDs and Mutual Funds

The table below highlights the major differences between FDs and mutual funds -


Mutual Funds

Fixed Deposit


Depends on MF scheme

Low risk



Medium to High

Offered by

AMCs & Fund Houses

Banks, NBFCs. etc.

Ideal Investor

Investor with medium to high risk appetite

Investor with lower risk appetite

Market Exposure

Exposed to fluctuations

No exposure once FD is locked


Based on market fluctuations

Stable, based on interest rate


Securities and Exchange Board of India (SEBI)

Reserve Bank of India (RBI)


fd vs mutual fund

Mutual Funds vs FD: Benefits

FDs concentrate your funds into a single pool to earn a designated percentage of stable interest returns based on the rates of contemporary markets. Mutual funds, on the contrary, distribute that pool of funds into different investment channels to bring in the best returns possible per the current market conditions.  


With both catering to an individual's goal of building wealth and multiplying monetary assets, it is crucial to understand the specific benefits both can offer. Let’s put the mutual fund vs fixed deposit debate to rest, shall we?

  • Benefits of Mutual Funds

Portfolio Diversification: As compared to other market-linked investments, mutual funds are relatively safer. Hence, using them to diversify your portfolio would be a great option for you.


High Liquidity: Most mutual fund plans allow a smooth exit without an exit load, so liquidating your returns is entirely possible.


Different Scheme Options: You can invest in mutual funds through a lump sum or through SIP, and you can also choose from a plethora of mutual fund options based on your goals and risk appetite. 


Minimum Investment Amount: Depending on the scheme you invest in, your mutual fund investment can be as low as ₹500.

  • Benefits of Fixed Deposits

Flexible Investment Terms: The flexibility quotient of FDs lies in its ability to allow you to start investing with a deposit amount and tenor that you’re comfortable with, ranging for just a few days to many years. 


Stable Returns: Your returns will always be stable with FDs since the interest rate you lock your FD in would remain the same for as long as the FD tenor shall last despite market fluctuations.


Loan/Overdraft Facility: You can get a loan or overdraft against your FD, where you can acquire up to 90% of your deposit amount as a loan at an interest rate hike of up to 1%.


Special Rates: FDs offer special rates for senior citizens, which are higher by 0.25% to 0.50% than regular FD interest rates, making this a profitable investment for anyone above 60 years of age. 

Who Should Invest in Fixed Deposits?

If you identify with any of the parameters given below, fixed deposits may be your ideal investment option. 

  • Those with taxable income

  • Anyone who has spare funds lying idle

  • Someone uncomfortable with the idea of market risks

  • Retired individuals who would like a consistent source of income

Who Should Invest in Mutual Funds?

Mutual funds could be a great investment option if you relate to any of the following points. 

  • If you are okay with taking market risks

  • If you wish to fulfil a long-term or short-term financial goal

  • If you want to diversify your portfolio

  • If you’d like to earn more than a regular savings account could give you as returns

FD vs Mutual Funds - Which is Safer?

When it comes to the safety and security of your returns, here’s a quick comparison of how fixed deposits and mutual funds can serve you. 

Fixed Deposits

Mutual Funds

  • No impact of market fluctuations once FD is locked in

  • Stable returns as compared to MFs

  • Not very diverse with respect to investment routes

  • Affected by market fluctuations since it deals with the equity market directly

  • Higher returns as compared to FDs

  • Very diverse since funds are channelled into a range of investment instruments

Mutual Funds or FDs - Which is Better?

The difference between mutual funds and fixed deposits and a major comparison parameter is their respective risk margins. It stands as an important determinant of which of the two an investor will choose. If building a diversified portfolio along with great returns is your goal, and you’re okay with a little bit of market risk, you can pick mutual funds as your investment of choice. However, if your risk appetite is lower but building your wealth is still a priority, fixed deposits have your back with secure and stable returns.


Your investments also heavily depend on the extent of returns you can earn since investments are all about building financial stability and growing your corpus. Hence, a good move would be to compare the possible returns you could receive. You can make this comparison through a fixed deposit calculator and mutual funds calculator.


You can find these calculators anywhere on the internet. However, you don’t need to look too far for an FD calculator. You can use the one accessible to you on Bajaj Markets. You can derive an approximate calculation within seconds and easily decide whether FDs are the one for you. Moreover, you can use it as many times as you’d like to without any extra charges or limits on the number of tries. 

Tax on FDs and Mutual Funds

Here’s how the taxation process works for fixed deposits and mutual funds, respectively. 

Fixed Deposits

The tax breakdown is very simple when it comes to fixed deposits. You only have to remember two categorical taxation factors.

  • Regular Citizens: 10% to 20% tax on returns of ₹40,000 and above 

  • Senior Citizens: 10% to 20% tax on returns above ₹50,000 and above. 

Note: If your annual income is less than ₹2.5 Lakhs, you will not be required to pay any taxes on your FD interest returns. Regular citizens are to furnish Form 15G, and senior citizens need to produce a complete Form 15H in order to claim tax returns for their FD interest earnings. 

Mutual Funds

Just like FDs, mutual-fund taxation is also bifurcated into two categories: 

 1Equity-based Funds:


  • 15% STCG for an MF of less than 12 months

  • 10% LTCG, barring indexation benefit, for an MF of more than 12 months and returns exceeding ₹1 Lakh

 2. Debt-based Funds:


  • 20% LTCG, including indexation benefit, with the MF is held for more than 36 months

  • Returns are taxable with accordance to slab rate if the holding period is less than 36 months

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Key Parameters

Here are the key parameters of FD vs MF presented in a comparative format which can further help you take the call on whether you would like to choose an FD or mutual funds. 

1. Returns

Mutual Funds

Fixed Deposits

Equity mutual funds returns depend on the stock markets, while fixed mutual funds are very similar to fixed deposit returns.

Returns are predetermined per the rates offered by various banks and NBFCs.

Long-term MFs (5 years to 6 years) can bring you around 12% p.a., while short-term MFs can bring you about 6% - 7% p.a.

You can get up to 9.00% or more through fixed deposit returns.

2. Risk

Mutual Funds

Fixed Deposits

Risky since they are directly linked to the market and its subsequent rise and fall.

The risk factor is relatively low since the same interest rate is maintained through the tenor despite market changes.

The risk factor can vary depending on the type of mutual fund you pick.

The risk factor is equally low across all FD types and categories.

3. Growth

Mutual Funds

Fixed Deposits

Growth and depletion depend directly on the market’s performance.

The growth factor remains the same as discussed by investors and banks/NBFCs before lock-in.

If the market goes up, the returns follow.

If the market changes, the returns remain the same.

4. Withdrawal

Mutual Funds

Fixed Deposits

Open-ended mutual fund investments allow you to walk out whenever you please.

Fixed deposits hold no open-ended options wherein the investor can withdraw without repercussions.

In some cases, 1% exit-load fee has to be paid at premature withdrawal.

You will be liable to pay a penalty for the premature closure of your fixed deposit account.


The information provided by BFDL herein above is related to the Non-Partnered Banks/ NBFCs and is just for the purpose of information and under no circumstances the information provided hereinabove is intended to be source of advice or recommending any financial investment advice or endorsement of any sort. 

The information including interest rates with regard to fixed deposit, provided on this website is gathered through publicly available sources over the internet and is considered as accurate and reliable to the best of our knowledge. BFDL disclaims any responsibility or liability regarding inaccuracies, omissions, mistakes etc. as well as offers by the Non-Partnered Banks. The use of 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. You are advised to visit/ contact the respective Banks/ NBFCs to verify the information before making any investment or opening an account. Further, BFDL does not undertake any responsibility or liability to update this information. YOU ARE SOLELY RESPONSIBLE FOR ANY LIABILITY OR DAMAGE YOU INCUR THROUGH ACCESS TO OR USE OF THE SITE OR SUCH INFORMATION OR MATERIALS EXCEPT WHERE THE LAWS AND REGULATIONS OF A PARTICULAR JURISDICTION CONCERNING WARRANTIES CANNOT BE WAIVED. Additionally, display of any trademarks, tradenames, logo and other subject matters of intellectual property owners. Display of such Intellectual Property along with the related product information does not imply BFDL’s partnership with the owner of the Intellectual Property of such products. 

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Debt mutual funds are one such type of investment that is very similar to fixed deposits when it comes to investment returns.

During emergencies, when you need immediate funds, mutual funds and FDs can fare well for you since both allow you to cut short investment durations as and when you need to. However, do remember that certain MFs and FDs will come with a penalty for premature closure.

If you are certain about mutual funds being the better investment option for you, feel free to do so. However, do consider the differences between both investment options and analyse all parameters before foreclosing your fixed deposit to invest in mutual funds.

FDs are safer since market fluctuations bear no weight on fixed deposit returns once you have locked your investment in.

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