Mutual Funds and Fixed Deposits: Which is Better?

Mutual Funds and Fixed Deposits: Which is Better?

Mutual Funds (Debt) and Fixed deposits are the two financial products in which you can invest for the regular and safe income of your money.

Now, the question is that, Which is Better? Mutual Funds or Fixed deposits?

Well, in my opinion debt funds are better than the fixed deposits. This is because a debt mutual fund can invest your money in variety of corporate and debt papers – Government & private both while the FDs are only with one bank.

Thus, Debt mutual funds are more diversified than the bank FDs. Not only this but the debt funds can offer you more returns than the Bank FDs and that’s why to generate long term fix and steady income, debt funds are more advantageous than the bank Fixed deposits.

One thing I like about the debt funds the most is that, they can invest in private debt papers also that the individual investor can not. This is because Individuals have very less money to buy a commercial debt paper while the mutual funds are sitting on a huge cashpile of the money from the large amount of investors.

Another bad thing about FDs is that, they will charge TDS (Tax deduction at source) from you for the amount above Rs.10,000 while in case of mutual funds, there is not any such kind of TDS.

Thus, over all mutual funds are more convenient to build a portfolio rather than the FDs. And on the top of this, you can exit from the debt funds anytime. They don’t come with any lock-in period while the bank fixed deposits come with a lock-in period and you can not exit from them without any penalty charge before its lock-in period.

So choose debt mutual funds for your debt portfolio rather than Bank FDs.