If you are confused regarding your investment options with having to select between mutual funds and fixed deposits, it is necessary to evaluate the pros and cons of each before taking a call.
A fixed deposit scheme is more of a fixed investment option for individuals who are more inclined towards the safety quotient. As the rates are fixed, FDs offer a pre-existing sum but not without deducting the TDS amount. However, the invested amount is liable for tax claims according to Section 80C of ITA. However, mutual funds are market-linked and the growth rates are therefore high but variable.
When it comes to the FD rates in India, you are more likely to experience something in the 6.5 percent to 7 percent range. However, the returns are guaranteed and you need not factor in the market volatility like the mutual funds. Moreover, mutual funds offer higher interest rates but their overreliance on market performance makes them risky investments.
Therefore, if you are a safe investor who is more interested in sure shot returns, a fixed deposit scheme is worth considering as a mid-term investment. Moreover, a majority of financial institutions also offer an FD insurance cover of up to 1 lac. Mutual funds, on the other hand, can be attributed to a higher appreciation of the invested funds but not without their share of risks.
However, if you are inclined towards mutual funds, consider the debt-linked options instead of equity-backed mutual funds.
