Last updated on May 1st, 2024 at 03:45 pm
Are you looking to invest in Fixed Deposit or Lumpsum in Mutual Fund? So FD Vs Lumpsum? Which is better for you? Here are the pros and cons of both investments.
You should know the difference between fixed deposit vs mutual fund before investing in them.
Fixed Deposit
Fixed deposit or bank FD is a investment tool to invest in a bank. Customer invest a lump sum amount for a fixed interest and a specified time. On the time of maturity. You will get your all maturity amount and compounded interest.
Lumpsum In Mutual Fund
Mutual funds are more beneficial than bank FD. Lumpsum are same as bank FD but they come with high returns. But fixed deposits are more safer.
Before investing in bank fixed deposit or lump sum in mutual fund, you should know these 5 things.
1. More Beneficial?
Which investment is more beneficial for you? So the clear answer is lump sum in mutual funds. Mutual funds give you high returns compared to bank fixed deposits. But mutual funds are come with high risk then FD.
Average returns in Lumpsum are. 10 to 15% and 6 to 7% in Bank FD. Returns in Lumpsum are mostly fixed. The main advantage of Bank FD is they are safe and secure.
So if you want high returns and high risk, you can go with lumpsum, but you want low risks but low returns, you can go with bank FD. Both are safer than stock market.
2. Term
Investment period is also very important in any kind of investments. If you are looking to invest for long term, you can go with lump sum in mutual fund, but if you’re looking to invest for a short term, you can go with bank FD.
Returns on lumpsum are very high compared to Bank FD. So if you are planning to go for long, you can go with mutual funds.
You can try our tools to calculate your returns on both.
3. Easy To Access
Which investment is easy to access or which can be easily converted to cash? So fixed deposits are easy to convert in cash, but lumpsum are hard to convert in cash. Overall, both are easy to convert in cash, but more suitable is bank FD.
But there is a problem with bank fixed deposit, If you convert them before time, You have to pay charges and penalties. In mostly cases lumpsum are easy to access.
4. Inflation
The most important topic in the world is inflation. Which investment is inflation proof? So mutual funds are inflation proof in many cases. Because returns in mutual funds are higher than bank FD’s.
Because average inflation rate is 5% to 7%, but bank FD return rate is only between 6 to 7%. Many mutual funds average return rate is 10% to 15% and higher in many funds. You can research or take advice of your financial advisor.
5. Opportunities
So in the race of FD Vs Lumpsum, mutual funds come with many opportunities. Fixed deposits are only for bank accounts, but a lump sum or mutual fund. They will invest your money in different entities.
Your fund manager will invest your money in stock, Gold Bond and many other options. You will get advantage of market Time horizon. Mostly people are investing their amount in bear market and get good returns in bull market.
So these are differences between FD Vs Lumpsum. You can visit SEBI website for more info.