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Saturday, Oct 1, 2022

Fixed Deposits vs. Debt Funds: Where to Invest Your Hard-Earned Money?

Fixed Deposits have been the go-to investment option for most Indians till now. However, with the concepts of fast compounding of wealth amongst others becoming increasingly popular, Indians are venturing out. Despite that, the Indian middle-income household is yet to overcome its fixation with Fixed Deposits.

Are Indians More Prone to Investing Now?

The Indian population, earlier bullish on matters related to the stock market and shares, is now open to investing even further. They are investing not just in equities but also in bonds and securities. Such types of investments are also known as Debt Funds. 

So, what does this tell us? 

Now more than ever, Indians are open to investments. Whether traditional Fixed Deposits or bonds, investments are on the rise. In August 2021, there were 1.2 crore active investors in India, a nation of 138 crore people, according to figures from the National Stock Exchange (NSE). 

People tend to deviate more toward Fixed Deposits because returns can be predicted using the Fixed Deposit Interest Calculator. All it takes is a fixed sum, a pre-fixed tenure, and a rate of interest of your choice to make a well-informed decision.

Where Should I Invest My Money? 

Both Fixed Deposits and Debt Funds are popular modes of investment in India. Fixed Deposits allow investors to invest a sum for a specified period while accumulating a fixed interest rate for the said tenure. One can calculate the expected return using the Fixed Deposit Interest Rate Calculator.

Debt Funds are mutual funds that invest in capital-appreciating fixed-income assets, such as corporate and government bonds, corporate debt securities, money market instruments, etc. Bond funds and income funds are other names for Debt Funds.

There are multiple advantages associated with a Fixed Deposit. At the same time, Debt Funds are not without merit either. Let us learn more about where and why to invest in this article.

Fixed Deposits First – Why?

Consolidating additionally earned funds into Fixed Deposits is a tradition in our financial practices. Fixed Deposits have the safety net of guaranteed returns attached to them. 

  • The guaranteed rate of return on Fixed Deposits is one of the main factors that individuals consider when choosing where to invest their money. 
  • If customers invest their money into a Fixed Deposit, they can easily predict what amount they’ll earn as interest on their investment. 
  • This calculation is based on the advertised rate given by the institution that issued the deposit. 
  • Fixed Deposit rates are also made available within bank locations and online via several calculators that customers may utilise to know how much profit they will reap for themselves within a certain period.
  • All this is possible only after placing money into an accredited account with an insured financial institution.

What are the Advantages of Investing in Fixed Deposits?

The advantages of investing in Fixed Deposits far outweigh any disadvantages.

  • For interest earned less than Rs. 10,000 doesn’t get taxed by the bank. So, there’s no tax deduction unless a customer’s interest earnings across all fixed deposits are equal to or greater than Rs. 10,000. 
  • All in all, this gives people who own small deposits a certain level of comfort as they are not taxed unless they earn more than 10,000 on their interest.
  • Depending on the bank, the tenure for Fixed Deposits is flexible. Banks have minimum durations for Fixed Deposit tenure, but the depositor has options in this regard. There are several options when it comes to extending a Fixed Deposit.

How Will I Benefit from Investing in Fixed Deposits?

A Fixed Deposit is a great way of allowing yourself to focus on what really matters while someone takes care of saving your money. 

  • A Fixed Deposit is a valuable tool available at many banks. It allows you to keep your funds in what amounts to an interest-bearing account locked in until yours or the bank’s specified maturity date. 
  • Because there are different terms and rates, it’s best to explore all options, however long they may be, so that you receive the maximum return. 
  • Fixed Deposits are also flexible enough in their nature, making early releases possible with permission from both parties.

Fixed Deposits Vs. Debt Funds: The Call is Yours

Fixed Deposits should be the go-to option if you prefer adhering to your conventional sense of investments. In addition to the beliefs regarding investing, a complete risk aversion with no intention of losing wealth can be the driving force behind choosing Fixed Deposits

You can even use a Fixed Deposit interest calculator to predict your guaranteed returns. 

On the other hand, if earning profits while maintaining a lesser degree of risk aversion is your agenda, then Debt Funds should be your first choice of investments in the long run.

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