Fixed Deposit is a type of financial instrument offered by banks which allows individuals to deposit sums of money for a particular period of time ranging from 7 days to as long as 10 years. Fixed deposit accounts offer higher interest rates than savings accounts.
A large number of Indians invest in fixed deposits because they offer guaranteed return as well as capital protection. This means that the money is safe and you will be earning interest also. But with the changing times, and increasing inflation fixed deposits may not be enough anymore. People are switching from fixed deposits to mutual funds. Mutual funds give a higher rate of return as compared to FDs. They also have easier liquidity provisions, which are not available in case of FDs. So in order to understand which is better – Mutual Funds or Fixed Deposits, we need to do a detailed comparison of the two investment options.
Fixed deposit investors may not want to move directly to equity mutual funds, but debt mutual funds are investment options that they should definitely consider. So we are going to make a comparison between debt mutual funds and FDs first.