Fixed deposits and mutual funds represent two ends of the investment spectrum. FDs offer safety and guaranteed returns while mutual funds offer higher potential returns with market-linked risk.
Key Differences
- Returns: FD around 6-8% guaranteed; Mutual funds 10-15% expected for equity
- Risk: FD very low; Mutual funds vary from low (debt) to high (equity)
- Liquidity: FD has penalty for early withdrawal; Mutual funds redeem in 1-3 days
- Tax: FD interest fully taxable; Equity funds taxed at 10% on gains over Rs. 1 lakh
- Minimum investment: FD from Rs. 1,000; Mutual funds from Rs. 500
A balanced approach keeping emergency funds in FDs and long-term goals in mutual funds is often the smartest strategy.
Compare investment returns using our EMI Calculator.
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