Are Fixed Deposits better than Mutual Funds?

Fixed deposit Vs Mutual Fund?

When it comes to saving an amount, FD is the very safe option for all the investors. Major reason is, it is one of the oldest and safe saving investment option in the market who provides fixed rate of interest.

But is it still fixed deposit is the appropriate investment option in the market? Does Fixed deposit still provides the better rate of interest? Or there are other investments options like Mutual Funds that provide better investment returns in a better way?

Which one is better Fixed deposit or Mutual Fund?

FD is a very popular investment option provided by banking companies for short-term and long-term period. The rate of interest on fixed deposit are pre-decided by the Government of India. hence the growing inflation doesn’t impact the rate of return on these investments. Notably, the Fixed Deposit rate of interest are taxable for the investors but the Fixed Deposit investments are eligible for tax deductions under Section 80C of the Income Tax Act 1961.

On the other hand, Mutual Funds are based on market investment with no fixed return. However, during the long run, they have been observed to give 10-15% rate of return, which is pretty higher than fixed deposits. There are three types of Mutual Funds – Hybrid, Equity and Debt.

In Debt Mutual Fund majority of amount will invest in government bonds, corporate bonds, and securities and the rest of the amount in Equity share market whereas Equity Mutual Funds invest more amount in the equity share market and lesser in government bonds and other bonds & securities. Hybrid Mutual Funds invest partially in Debt Mutual Fund and Equity Mutual Fund.