When it comes to investing in mutual funds and fixed deposits (FD), the question comes in mind that it is better to invest in which of these two? Which is the most suitable for your financial goals. Actually, both have their relative benefits, but they serve different types of investors. If someone is looking for sure returns with minimal risk, FD can be an easy option. But if you are expecting high returns over time and are ready to take a little more risk, then mutual funds can be more correct for you.
Understand mutual funds
Mutual funds are investments in which money is collected from many people and re -invested by experts on your behalf. These funds can be invested in combination with equity, bonds, or both these options, ie, depending on the type of funds, the risk and related rewards will vary. You invest in equity funds with more probability of more than other forms; However, investment is equally riskd as its price depends on the performance of the stock market performance. On the other hand, date funds are relatively stable and give low returns with minimal risk.
Return against MF in FD
According to Kotak Securities, the beauty of mutual funds is that you can choose from very low -risk funds to very unexpected funds that promise too much and exciting returns. On the other hand, fixed deposits are very straightforward. You invest a lump sum for a fixed period in exchange for a guaranteed interest rate. You get stuck in that deposit for some time, and while the risk involved is almost zero, returns are usually much less than mutual funds. However, if anyone wants to invest in keeping with safety and forecast in mind, they may be correct. Also, deposits of up to Rs 5 lakh are insured in India, so you can be completely sure that your money is safe.
Mutual funds, especially equity funds, have the ability to give better returns in a long time. On the other hand, it also means that you have to be ready to handle market fluctuations as it may or may not be in your favor. Conversely, returns on FD are largely estimated. You know how much money you will have till the end of your investment period. If you are among those who like certainty, FDs give you mental peace. But when it comes to increasing your funds adequately, mutual funds can be a good option, especially if you want to invest in it for a long time.
This is the provision regarding tax exemption
Mutual funds are slightly more taxing, especially when you invest in tax saving options such as ELSS (Equity Linked Savings Scheme) that allow cuts under Section 80C. However, if your investment is on the date fund, tax treatment may be slightly inferior. On the other hand, FDs do not provide similar facilities. The interest earned in this is completely taxable, which can eat your returns. Especially if you are in a high tax bracket.
Who is better in access to money
In mutual funds, you have a lot of flexibility. You can redeem your units anytime, although some exit load or capital gains may have to be paid. But most of the time, if you need access to your money, it is very easy. But the problem with FD is that they have a lock-in period. If you want to withdraw ahead of time, then you have to give penalty and your return will be less than expected.
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