Debt Mutual Fund vs. Fixed Deposit- which is better?

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When you are planning to save money most investors prefer Fixed Deposits over any new investment instrument, one of the big reason for this is; it is one of the oldest investment instruments. Also, fixed deposit provides a fixed rate of return and it is also the safest. But now days are changing new investment instruments are coming into the financial market, which provides high returns and also more liquidity. Debt Mutual Fund is in the market for years now and it is also providing a good return which is higher than the fixed deposit and also has high liquidity. Now the main question is where investors should invest which one is better, here we will talk about Debt Mutual Fund vs. Fixed Deposit. Here we will provide a visual about Debt Mutual Fund vs. Fixed Deposit.

ParticularsDebt Mutual FundFixed Deposit
Returns7%-9%6%-8%
Option for dividendAvailableNot-available
RiskLow risk to moderate riskLow risk
Liquidity levelHigh LiquidityLow liquidity
Investment optionYou can go for a one-time investment ( lump sum) or you can go for monthly investment option (SIP)You only can go for lump sum investment option
WithdrawalYou can withdraw it any time some debt mutual fund has exit load some don’t have any exit load.A penalty amount is levied on the premature withdrawals
Investment expensesA minimal expense ratio is chargedNo management cost

Fixed Deposits

  • An old financial investment instrument which is offered by the banks, and post office.
  • Fixed Deposit provides higher returns than savings accounts.
  • Fixed deposits offer a particular interest rate for particular time tenure, which is pre-specified.
  • If you withdraw from your fixed deposit before that pre-specified tenure bank will charge an amount from you.
  • Fixed deposits are safe instruments.
  • The interest bank offers over a fixed deposit is already specified
  • The interest rate on fixed deposit is 6%-8% which is very low than other financial investment instruments.

Debt Mutual Funds

  • Debt Mutual Funds provide a higher interest rate than fixed deposits.
  • You can withdraw your money any time you want; some fund has exit load and some debt mutual funds do not have any exit load.
  • Debt Mutual funds provide high liquidity.
  • The expense ratio of debt mutual fund is low.
  • Debt mutual fund has low to moderate risk.
  • You can invest in Debt Mutual Funds through SIP or lump sum, whatever you want.

In case of Debt Mutual Fund vs. Fixed Deposit you can choose anyone as per your choice of investment, debt mutual funds are new in investment game than fixed deposits but they are doing well over the years in other hand fixed deposits are oldest and they provide a steady return. But if you are someone who can take some little risk to get a high return value then you should go for debt mutual fund as the return is high also debt mutual fund provides high liquidity but in case of fixed deposits they don’t take any management cost, so you can choose any one of them or both as per your choice of investment.

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