Fixed Deposit vs Mutual Fund

Fixed Deposit Vs Mutual Fund: Which is Better to Invest in?

In present times, financial growth is an important aspect of living a good life. Often, we focus on one stream of regular income sources but it is pertinent to think of varied sources of income so that we can build a strong infrastructure for earning more and of stable income resources.

There are innumerable ways of earning but there needs to be a plan to make it into a stable and steady income source. Also, dedication, research on market trends, and awareness of risk factor time and effort are essential attributes for making a steady source of income.

The most important aspect is not to squander it but to invest in strategic financial investment platforms like a fixed deposit or a mutual fund, for it to grow.

The unpredictable nature of life compels us to think of the future. Especially, during a situation like a job loss, medical crisis, war, and pandemic, the thought and action of creating an investment source is an essential safety net for an individual and family. Liquidity, security, and accessibility are the three main considerations to be kept in mind during investment in a fixed deposit or mutual fund.

Moreover, during a crisis, the sudden requirement of cash necessitates the emergency fund to be kept in an easily accessible place, whether it be home, fixed deposits, or liquid mutual fund and others.

Fixed Deposit

This is the most stable option for investment with no risk and a fixed return through the bank interest. Now, if one gets a lump sum amount of cash through an extra income source, it’s best to open a fixed deposit account at a local bank with good rates of interest. This can also become a good post-retirement income plan.

Mutual Funds

This is a high-risk high gain option where one can buy shares of companies and sell them off on a short-term basis or long term. If one is looking for a long term gain, then following the market trend is important to know which company would be best for gaining long term benefit. Shares and stocks can be kept as a very good investment option which usually gives good returns.

Comparisons between investment in Fixed Deposit and Mutual Funds

  1. In fixed deposits, the rate of interest is fixed and hence one has an exact idea of the amount of return from the investment. But in mutual funds, the returns are unpredictable because the returns are based on the highs and lows that the market goes through and strategic trade.
  2. There is no guarantee of returns in mutual funds but a fixed amount of return is assured when a fixed deposit is taken into consideration.
  3. A fixed deposit investor does not need to understand or research the market trends but it becomes a necessity for an investor in mutual funds to do the same.
  4. A mutual fund requires additional charges to be paid by the investor for fund management but it is not so in the case of a fixed deposit.

Hence, both fixed deposits and mutual funds are good investment assets. The investor should keep in mind his needs and the risk factors involved before investing.

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