Which is a Better Investment Option: Bond Vs FD Vs Debt Funds

Bonds: Bonds are the best investment platform for those investors who believe in fixed returns and invest money for fixed tenure. The bonds pay returns on a regular basis. It is a fixed income instrument and interest earned from tax-free bonds is exempted from tax. The lock period is 3 years or 10 years and the returns will be 6.69% to 7.58%

Fixed Deposit: As by the name a fixed deposit is that platform who offers interest for the fixed time period. You will get the benefit that at the time of maturity of Fixed Deposit you can increase interest and in case you are not finding your investment in profit then you can withdraw your FD any time.

Debt Funds: It is like the broader form of the mutual fund. It is a good platform for investment as debt funds deliver best, stable and low-risk returns which is quite better than Fixed deposit. There is no lock period and interest usually lies at multiple factors but the highest is 9% on average.

Here is table refining these three:

Characteristics	Fixed Deposit	Debt Funds	Bonds
Duration of Deposit	7 days – 10 years	No lock-in period	3 years, 10 years
Risk factor	Banks & NBFCs provide an implicit guarantee	Debt funds invested in corporate funds are riskier than other debt funds	Government bonds carry less risk than other bonds
Returns	6.5% average for 1 to 10 years	Dependent on multiple factors	6.69% to 7.58%
Taxation	Post-tax return – 4.47% for higher tax slab Post-tax return – 5.15% for lowest tax slab	Tax is reduced after three years, approximately 20%	Tax is reduced after three years, approximately 20%
How to invest	By visiting bank or NBFC or checking online for best fd rates	By visiting the online website of debt funds	Should have a Demat account to open bonds for few bonds

The best one

This will be decided on the basis of monthly income, tax slabs, specific financial growth, and purposes. You will decide which will give you more benefits and which one not.

Related Post

Fixed Deposit Short Term Investment for Getting Higher Interest Rates

Feature Of Fixed Deposit Doesn't Have To Be Hard. Read These 6 Tips