FD vs Mutual Funds

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.

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

 

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. 

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

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

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. 

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. 

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

2. Risk

3. Growth

4. Withdrawal