Friday, September 30

Why Fixed Deposits Better than Debt Mutual Funds?

Fixed Deposit and Its Advantages

A Fixed deposit is believed to be the safest and most secured investment option, which is why people from non-financial backgrounds opt for this option. The Fixed deposits in the bank can be traced back to the long history of Indian investment. Indians believe in depositing their money in FDs because it gives a secured interest rate at maturity. FD calculator is the instrumental help that provides the interest rate details with the tenure details. 

Debt funds do not return the assured returns. It can depend on the market and how much return one will receive. At the same time, FD returns are guaranteed from 5.1% to 5.4%. Although, experts have different opinions on the difference between debt funds and FDs. This is said that the interest rate of FDs in India has been stagnant. Fixed deposits have also been known as “term deposits” and “time deposits”. Fixed deposit is the option for those who do not want to play with the market risks. FD has been the safest investment choice for the depositors where the amount is promised. 

A fixed deposit’s duration varies from 1 year to 5 years. No interest amount is confirmed at intervals. The best part of a fixed deposit is considering that amounts can be reinvested for another tenure. A fixed deposit is a haven for those who want their money safely locked in. Fixed deposit is an easy investment process that one can apply online. In certain banks, the amount has to be on or below two crores with 6.65% of interest, which can be better understood through the FD calculator. Fixed deposits in banks fixate on the interest rate changes from time to time. The interest rate on the FDs is subject to the tax deduction, which will be reflected at the withdrawal time. The period of the FD could stretch from 7 days to 240 months. The interest rate depends on the period. 

What is Debt Mutual Fund and Its Advantages

Debt mutual funds are for those investors who can seek stable options. There are two types of income funds: short-term income funds and long-term income funds. A mutual debt fund is a process where money is invested in corporate and government bonds and corporate debt securities. Few debt mutual funds are commercial papers, certificates of deposit, corporate bonds, and T-Bills. Debt mutual funds are more easy-going than equity funds and do not cause much risk for the investors. Four significant debt mutual funds are overnight, liquid, ultra-short duration, and low duration funds. These four funds are for a short period, giving the best returns at the withdrawal time. Most investors invest money in the liquid fund because investors can withdraw an amount up to Rs. 50,000. 

Those market players invest their money in mutual funds to get a better return. Mutual funds are irresistible but compared to the equity fund; these debt mutual funds are more stable. In a joint debt fund, stability is half-assured because the market risk is prevalent in such an investment portfolio. Debt funds do not include high tax deductions like an equity fund. 

Which One is Better: Fixed Deposit or Debt Mutual Fund – 

The choice lies with the investors whether they want to play safely in their investment process or wish to gain higher returns. There are few constraints of FDs like it deducts penalties if withdrawn early, and the interest rate becomes flat, unlike debt mutual funds. But the conservative investors opt for a fixed deposit because they want to be assured that their money will be returned with a decent interest rate. The market risk does not impact the interest rate of the fixed deposit. On the other hand, the debt mutual funds would not guarantee one with a fixed interest rate because, with the market fluctuation, it can go up and down. With FDs in the bank, one can avail of the credit card and the loan. 90% of the fixed deposit can be used as a loan. In RBL bank, the interest rate will be considered simple if the money is withdrawn below 181 days. For a senior citizen, the interest amount will be 0.5% per annum, and they have to be residents of India.

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