Mutual funds or fixed deposit - which one's for you?

Mutual funds and fixed deposits are two major means of investments. People go for FDs as they are risk-free investments, while investors choose a mutual fund to gain high returns over the time period. To gain high returns on your investment, you need to be informed and always updated with different means of investments and their benefits.

Benefits of Fixed Deposits

Fixed deposit, as the name suggests, returns interest on certain amount kept in savings account for a fixed time period. FD does not involve any market risk, hence it is considered a safe investment option. Fixed deposits offer benefits such as:

• The high rate of interest than offered on the savings bank account
• The tenor period ranges from one to five years
• Returns are guaranteed
• Customers can avail loan against fixed deposit
• Higher rate of interest for senior citizens than regular FD
• Customers can break FD and withdraw the amount in the time of crisis

Benefits of Mutual Funds

A mutual fund is an institute where the money is pooled by different investors and is invested in stocks, bonds, and other market-related products. Mutual funds and their returns are subject to market risks; thus, investors enjoy high returns over the period of time. Investing in MF has benefits such as:

• Diverse investment through different industrial and financial sectors
• Investing in stock, equity, debt, and bonds
• Small capital investment
• Investments are managed by professional managers
• Different modes of investment

Which one is a better investment option?

Whether to invest in mutual funds or fixed deposits depends on how much risk an investor is willing to take. Fixed deposit offers fixed and guaranteed returns as the returns do not depend on market risk. FD offers a higher rate of interest to senior citizens and investing in FD does not require detailed knowledge of market ups and downs. Thus investors who do not wish to take any market risk go for FDs.

Mutual funds, on the other hand, are subject to market risk. However, diversification of portfolio lowers the market risks. As the money is invested in stocks, bonds, equity and debt mutual fund schemes, investors can benefit from market growth and compounding factor. Though market fluctuates all the time, over the time, the market index is always shown increasing. So investing in MF can benefit in the longer run. A mutual fund is a better option for young investors and people who are willing to take risks.

About This Author

Shaheen Shaikh http://www.adrclinic.co.uk Joined: April 29th, 2018