A Fixed Deposit (FD) provides interest-based returns on the amount deposited, while a Mutual Fund (MF) provides returns on the amount invested. Depending on your financial goals, you can decide if a Mutual Fund, Systematic Investment Plan or a Fixed deposit is the right choice.
Each investment scheme has its benefits. While a SIP or Mutual fund may give you better returns, an FD is a relatively stable option that offers fixed returns. Making an informed decision requires a lot of research, which we have done for you - read more to know which investment scheme will suit your needs best.
What is a Mutual Fund?
In simple terms, a Mutual Fund is a fund that pools money from individual investors and reinvests this accumulated fund in various companies. The returns get distributed among all those who invested according to their contribution. Here are some benefits of a mutual fund that you should consider:
- A mutual fund is a long-term scheme that benefits your future goals.
- The lock-in period for a Mutual Fund depends on your chosen scheme, but you may exit when you wish to.
- Any gains you make before the year-end are taxed under short-term capital gains tax.
- Mutual funds have a more comprehensive classification of funds to cater to the unique requirements of those looking to invest.
What is a Systematic Investment Plan (SIP)?
A Systematic Investment Plan (SIP) is an investment that allows you to make monthly deposits of small amounts of money. SIPs could be a stepping stone for new investors to invest in mutual funds. SIPs can also be long-term investments. People can invest whenever it is convenient for them. Here are some benefits you will get along with a SIP account:
- It is simple to start SIP, and a bonus feature is that you can track how the assets are performing at your convenience.
- Money can be invested and withdrawn at any time as SIPs are in open-ended funds.
What is a Fixed Deposit (FD)?
A fixed deposit, or an FD, is a type of investment that allows consumers to deposit a lump sum of money for a certain period. This service is provided by financial institutions.
Shriram Finance offers competitive interest rates on FD, ensuring you can achieve your future goals. Here are some benefits of opening a fixed deposit:
- A fixed deposit investment is low to moderate risk as the interest rates are not dependent on market fluctuations.
- It offers flexibility to the people investing, as they can select the amount and period they want to invest.
- Upon completion of the FD tenure, the entire amount invested, plus interest, will be deposited into the investor's bank account.
Differences between a Mutual Fund, SIP and an FD
Which type of investment scheme should you invest in?
Considering all the benefits and risks, investing in a fixed deposit is a relatively stable option. You can always use an FD calculator to check the exact interest you can get for the amount you want to deposit.
A mutual fund and SIP can offer you faster growth than an FD, but they are also risky as they are subject to market fluctuations. You can choose the risk according to your suitability. An FD is much more stable and can offer steady returns on your investments.
Conclusion
The final decision rests with you and your financial goals. Now that you know the differences between a mutual fund, SIP and an FD, you can make the right decision after considering all factors. Invest in a fixed deposit with Shriram Finance to get predictable returns on your investments. You can check the interest rates according to the type of investment you want to make.
Key highlights:
- Mutual fund and SIP investments offer higher returns on your investments.
- Investing in a fixed deposit can be low to moderate risk.
- You can use an FD calculator to find the exact interest for a deposit of your preference.