Fixed Deposit Versus Mutual Funds

By Author: Neha Sharma
Total Articles: 170
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If you are looking for an option to invest your surplus funds, there are several from which you can choose from. Out of these choices, a few of the more popular options include financial products like fixed deposits and mutual funds. In this article, we give you relative information about both these prospective investment options as well as the factors you need to keep in mind before investing in the same:

• Tenure

In both of these investment options, there are several choices of length of tenure that can range from a few months to a few years. However, the benefits for both are different based on the tenure. For a fixed deposit, the long term tenure period is more beneficial as compared to the short term. This is due to the fact that when calculating for the interest percentage while using additional tools like a FD calculator, it will be seen that the length of the tenure will also be taken into account. There is no cause in this case for any loss in funds as compared to mutual funds. Investing in mutual funds, on the other hand, depends on the market scene. If the market is not performing, the investor might ...
... lose more than just the amount invested for the short term. However, in long term, based on the market scenario, one can benefit from investing in mutual funds.

• Return on investment

The return on investment on these options depends on a number of different factors. FD’s have a percentage of interest that is fixed throughout the tenure of the investment, which can also be calculated using a FD calculator. Indeed, it is advisable that such tools be used as well as is possible to gain the most amount of information. This percentage does not change in accordance with the market conditions. However, with mutual funds, the changing market conditions affect the net asset value of the fund investment thus affecting the consecutive returns of this investment.

• Variables involved

There are a number of variables that can be involved in both investment options. While the risks are almost nonexistent for a fixed deposit, there are a number of risks that can crop up while investing in mutual funds. FD’s are mostly affected by the every-changing inflation rate, where it is noted that the higher the inflation rate, the lower will be the returns. This cannot be taken into account even when you are using a fixed deposit interest calculator while calculating the interest rate. With MF’s, though, the investments rely heavily on the conditions and unpredictability of the markets which cause low returns or even negative returns.

• Penalty

There are certain penalties involved if the funds are withdrawn before the tenure period. Certain factors are taken into account like the agreed tenure period and interest rate, especially when calculating the interest rate when using a FD calculator. The former investment option offers a penalty of a nominal amount of 1 to 5% if it is removed before the tenure period. With the former investment option, it is possible to remove any amount of units which will affect the net asset value of the funds and also an exit load of 1% if withdrawn before a period of one year.

Author Bio :- Neha Sharma is an avid finance student who loves to write during her free time. She is well versed with the nuances of a Fixed Deposit and calculating data using a FD calculator. Understanding the advantages that a fixed deposit interest calculator offers, she wishes to share information about it to the public.