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FD vs Mutual Funds – 4 Factors to Consider Before Investing!

Posted: 29th December, 2022

Updated: 2nd February, 2023

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Many investment options exist in today’s fast-growing and developing era, but a fixed deposit and a mutual fund are among the best options currently available. A fixed deposit has features that make it easy to use and incredibly flexible. A mutual fund can offer high-interest rates but can be affected by market fluctuations. 

The returns from both investment options are plentiful, making them popular options. A fixed deposit is an investment in which you earn interest by depositing a lump sum of money for a specific tenure. A mutual fund is a financial instrument that is made up of a portfolio of stocks that are all market-linked.

You can invest online in an FD with Shriram and gain a high-interest rate on your deposits. Let’s examine the differences between the two investment options to help you grow your finances.


What is a Fixed Deposit?

A fixed deposit is one of the most secure investment options. An FD can help you earn interest in your savings and enables you to develop a healthy savings habit. The multiple features of an FD help you plan financial goals with ease. The benefits that come along with a fixed deposit are as follows:

  • You can get high interest rates and assured returns with a fixed deposit. 
  • Market fluctuations do not impact the deposit as the interest rate is predetermined and remains fixed till the maturity of the account.
  • You can get tax benefits on a fixed deposit if you invest in a 5-year tax-saving FD.
  • A fixed deposit is a one-time investment that does not require constant monitoring.
  • A loan against FD is available for quick funds in an emergency.
  • An FD can be readily withdrawn, but a penalty will be charged for premature withdrawal.
  • The flexible tenure lets you plan and select a fixed deposit scheme best suits your requirement. 

What is a Mutual Fund?

A mutual fund is an investment tool through which many investors pool their money to earn interest on their capital over time. This pool of funds is managed by a professional known as a fund manager or a portfolio manager. Their job is to curate different securities like bonds, stocks, gold, and other investment options that could give good returns. Here are some of the features and benefits of mutual funds:

  • With mutual funds, you can gain high returns over the long term.
  • A mutual fund has a lock-in period depending on the type of fund you choose.
  • Any interest you earn on a mutual fund is taxable as short-term capital gains.
  • You get to choose from different stocks to improve your chances of earning more returns from your investment.
  • By investing in an Equity Linked Savings Scheme (ELSS), an investor can claim up to Rs. 1.5 lakh exemption in their income tax. 

What is the Difference Between a Fixed Deposit and a Mutual Fund?

A fixed deposit and a mutual fund have similar features that can make it difficult for an investor to decide on one. Directly comparing the two types of investments can help you gain an insight into which investment would best suit your requirement.

Feature Fixed Deposit Mutual Fund
Rate of returns 6% - 8% 7% - 9%
Risk  Low Moderate
Premature withdrawal  The penalty is charged for withdrawal before maturity Allowed without exit load depending on the type of mutual fund.
Investment expenditure  No charges A certain fee is charged

Which Investment Option is the Better One?

The ideal investment option is the one that offers you the best features and helps you grow your finances grow steadily and securely. A fixed deposit is not only a secure savings scheme but also provides features that make it highly customisable. A mutual fund may look more attractive because of the higher interest rates, but you must remember that market fluctuations can impact the returns.

Invest in a Shriram Fixed Deposit today to give wings to all your financial dreams. In addition to the high-interest rates, you can get an additional 0.25% interest for renewing all Shriram deposits that have matured. Use the Shriram FD calculator now to determine the interest you can get for a tenure of your choice.


FAQs

  1. 1. Is it better to invest in a mutual fund or a fixed deposit?

A fixed deposit is a safer option and is highly customisable. A mutual fund is risky as market fluctuations can impact it.

  1. 2. Which mutual fund is best for 10 years?

Any mutual fund that gives you a higher interest rate is the best to invest in over 10 years. A fixed deposit can give you assured returns and a high-interest rate over 10 years.

  1. 3. Is there any chance of loss in mutual funds?

As mutual funds are affected by market fluctuations, there is a chance of loss of money. It is essential to read all the rules and guidelines before investing.

Key Highlights:

  • A fixed deposit and a mutual fund offer high-interest rates and are among the most popular investment options.
  • An FD is easy to use and has excellent flexibility.
  • A mutual fund offers attractive interest rates but can be impacted by market fluctuations.
  • You can use an FD calculator to determine the amount of interest you can get for a specific tenure.
What is a Callable and a Non-Callable Fixed Deposit?
What is a Callable and a Non-Callable Fixed Deposit?
How Does a Fixed Deposit Work? Is it safe to invest in a Fixed Deposit?
How Does a Fixed Deposit Work? Is it safe to invest in a Fixed Deposit?