How can we compare Fixed Deposits v/s Mutual Funds ?

How can we compare Fixed Deposits v/s Mutual Funds ?

  • By
  • Hely Gadhecha
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  • #1 Duration in Mutual Funds

    Generally, Fixed Deposits offer lesser returns on longer duration and mutual funds provide more. Fixed Deposits at present, provide the highest rate of interest for the period between one to two years. Mutual funds provide good returns the longer they are kept.

    mutual funds duration

    Short duration mutual funds

    #2 Lock-ins for Investment

    Fixed deposits offer lock-in periods of even less than a year (some even a few days) and can go up to a few years. In case of mutual funds, there are funds that permit a lock-in of less than a year and even of up to 5 years.

    lock in mutual funds

    lock in mutual funds

    #3 Returns for your value

    While Fixed Deposits may seem like the guaranteed source of returns, mutual funds have shown high returns even in short periods and despite turbulent market conditions. Fixed deposits give a fixed amount of return, whereas, the return on mutual funds depends on market conditions. If market conditions are conducive to the specific industry where funds have been invested, you can gain a lot of money.

    #4 Investment Security

    Fixed deposits are believed to be more secure as they provide return irrespective of market conditions. Mutual Funds returns may suffer if the markets crash. You might see a negative return for a short-term when the market recovers, but staying invested for a longer tenure has always been beneficial to investors. In most cases, mutual fund investors benefitted even if by small amounts.

    Mutual Fund Security

    Mutual Fund Security

    #5 Systematic Investment (Synvest-Ment)

    Mutual funds are believed to be more liquid than Fixed Deposits. A fixed deposit can be broken by incurring a penalty, this means the interest that you would have gained is decreased. To withdraw your mutual fund investment before the lock-in period you have to pay an exit load, which is small compared to your return. Thus, you should plan such that no urgent requirement arises at least during the lock-in period.

    #6 Regulatory authority

    Banks handle matters regarding Fixed Deposits, whereas SEBI (Securities and Exchange Board of India) regulates mutual funds. Banks are prone to running into losses and thus can’t offer high-interest rates. They also safeguard the interests of the public. SEBI, on the other hand, just specifies guidelines and lets things play out the way they should. They don’t function with a socialist perspective.

    #7 Returns over past 5 years

    Over the past 5 years, mutual funds have performed better than Fixed Deposits. All Fixed Deposits have always offered returns even if small. Mutual funds in the short-run may show some downfall, but in the long run, have outperformed other investments.


    Both plans have their pros and cons. Investment decisions should be made depending on the requirements of the investor and other relevant circumstances.


    Hely Gadhecha

    CEO of a successful financial advisor, Synvestment; Helly Gadhecha is an aspiring entrepreneur with an innovative approach in the financial industry. She has acquired her Master’s in business administration and finance from Nirma University. Along with her academic accomplishments, Helly Gadhecha has bagged an internship with the Reserve Bank of India (RBI) and practiced under prudent. She has the newest perspectives and is committed to exposing the graveness of wealth creation to the youth and homemakers. And accustom them with risk-free options and new trends of investment. With her open mind toward the financial industry and contemporary panorama. She affirms that a paltry sum would suffice to begin an investment amass their savings in form of investment. Bridging trust and endowing expert advice to customers is of high-priority for Helly Gadhecha. With many frauds taking advantage of the naïve investors, she is determined to assist folks and help manage funds in the most profitable and safe manner. Read More

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