Choosing an Investment – Fixed Deposits vs Mutual Funds

by Mariam jakson Marketing Head

Investment policies can be generally categorised in two types, market dependent, and assured returns. Market dependent policies promise a more significant return albeit the rate may vary depending on the rate of current financial condition. Market independent investments are low risk, high-yield options that guarantee return at a pre-determined rate.

Deciding the better in a mutual fund vs FD comparison requires sound know-how. As an investor, you should choose the better option for investment depending on your financial requirement and risk-taking ability. Let’s take a look at the merits and demerits of each and decide which one would be better suited.

Fixed Deposit vs Mutual Fund

Several factors differentiate mutual funds and fixed deposits. For example –

Rate of Return – Mutual funds offer market dependent returns, where the money is generated via multiple investors and investments into assets like shares, real estate, equity, liquid assets, etc. If the market value plunges, you will not get the initial rate of investments and can even suffer a loss.

Fixed deposits offer guaranteed as well as substantial returns. Bajaj Finance provides interest rates as high as 8.75% on their Fixed Deposit schemes.

Risk – Mutual funds are subject to market risks. Any fluctuation in the country’s financial market can increase or decrease the rate significantly.

Fixed deposits are one of the best low-risk investment platforms. Bajaj Finance Fixed Deposits are rated MAAA and FAAA/Stable rating by both ICRA and CRISIL.

Premature Withdrawal – Both mutual funds and fixed deposits offer early withdrawal. Mutual funds allow drawing of investment with exit load whereas fixed deposits allow withdrawal against a penalty.

However, you can avail a Loan Against Fixed Deposit from Bajaj Finserv instead of liquidating your investment. This option is available for both cumulative and non-cumulative FDs and offers 75% and 60% of the total invested sum respectively. Moreover, as the invested amount acts as a security against the credit, the interest rate usually stays within an affordable limit.

Mutual funds are suitable for individuals who are experienced investors and have a higher risk appetite. Fixed deposits are fit for everyone as it offers a lucrative interest rate and assured return against minimal risk.

If you opt for an FD as your investment platform, you can benefit from using a FD interest calculator. Plan the tenor, type of FD and your returns carefully to meet your financial goals and stay ahead of the future.