Why Should You Choose Fixed Deposits Over Mutual Funds?

by Shashank Bhaskar Finance Adviser

Investments are a means to get returns on savings. It lets your money work for you to increase total funds. It can get confusing to choose among different investment options available. Two such alternatives are Fixed deposits and Mutual funds. The fundamental difference is that the banks and financial institutions provide the former while the other gets sourced through private and public organisations. 

Many factors make Fixed deposits stand out as a safer and lucrative option in comparison to Mutual funds. Let us understand why: 

Return on Investment: Fixed deposit interest rates are pre-determined and stay the same throughout the deposit tenure. It guarantees expected returns which are withdrawable upon maturity. Hence, this makes it a risk-free investment scheme. Interest in Mutual funds gets affected by market fluctuations which results in unsteady income. 

Risk aversion: The FD interest rates are pre-set and guaranteed, which results in no-risk. Moreover, these accounts are insured to make sure your money is safe. The same cannot be said about mutual funds as the returns fluctuate according to market conditions. It can pose risks if you are not aware of the market to make profitable decisions.

No Expenses: Mutual funds come with certain expenses like investment management fees, operational costs, agent commissions, service charges, etc. On the other hand, fixed deposits do not have such payments unless there is pre-mature withdrawal. It is dependant on the acts of the depositor and not a compulsion. Also, benefits like mobile banking apps, online banking, etc., are available.

Simplicity: You need to have a decent knowledge of market volatility and how it affects your investments in mutual funds. You cannot get the most out of your funds if you lack awareness. On the other hand, Fixed deposits offer flexibility and are relatively simple to understand and involve zero risks of losing money.

Unaffected by market fluctuations: Fixed deposits are not affected by market conditions. It means you will get guaranteed income on FD rates even during deflation. It results in minimising risk and making sure you get returns regardless of adverse circumstances. You also get extra benefits if you have a senior citizen FD. 

If you desire to build your savings steadily without worrying, you can opt to invest in Fixed deposits. It is your discretion and goals that should determine your investment decision.

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About Shashank Bhaskar Innovator   Finance Adviser

14 connections, 1 recommendations, 80 honor points.
Joined APSense since, August 9th, 2018, From Mumbai, India.

Created on Mar 8th 2021 02:29. Viewed 186 times.


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