FD vs Mutual Funds – The War

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FD vs Mutual Funds – The War


Fixed Deposit, also known as FD, is a popular saving instrument provided by banks (both public and private) for both short-term and long-term investments. The rate of interest is fixed and pre-decided by the Indian Government, thus, the growing inflation doesn’t impact the return on these investments. Be notified that, the FD returns are taxable, but some Tax Saver FD investments are eligible for tax-deductions under section 80C.  


Mutual Funds, on the other way, are market-based investment instruments that pools money from people and later-on invests it in a variety of stocks, bonds, and other investments. They are managed by Fund Manager.  

In Short: 

  • Money pooled from different investors  
  • Managed professionally  
  • Well-regulated and defined by SEBI
  • Allowing to invest in small amounts  
  • High returns as compared to traditional investing  
  • Access to large portfolios  

There are three types of Mutual Funds: 

  • Equity Funds: Equity funds signifies to invest the money from individual investors into shares of numerous companies. When the share price rises, the investors make a profit and vice-versa. Also, equity funds are suitable only for those who are willing to stay invested for a long-time and have a higher risk-appetite.   
  • Debt Funds: Debt funds invest in fixed income government securities like bonds, reputed corporate deposits, or treasury bills. It is less risky as compared to equity funds. Debt funds are suitable for those who are risk-averse and looking at a short-investment horizon.   
  • Hybrid or Balanced Funds: As the name says, Balanced funds invest in both fixed income and equity funds to balance the risks and maintain a certain return rate.   

As stated, 

FD vs Mutual Funds 

The question is still fixed whether to invest in a Fixed Deposit or in a Mutual Fund. The following comparison of FD vs Mutual Funds is based on some parameters that might help you make an appropriate decision. Here: 

  • Rate of ReturnThe rate of interest on fixed deposit is generally fixed depending on the type and tenure of FD. Therefore, they are not expected to give a high interest rate. On the other hand, the return rate on mutual funds depends on the volatility of the market and the type of fund. When the market goes high, expectations of high returns are there and vice-versa. 
  • Investment ReturnA fixed deposit offers pre-decided investment returns which don’t change throughout the tenure of investments. On the other hand, mutual funds offer versatile returns on market-inked and long-term investments. The rule states – Longer the investment tenure, better will be the returns from mutual funds.  
  • Inflation ImpactFixed Deposit remain un-affected from the inflation as the rate of interest is pre-decided. Whilst, returns of mutual funds are inflation-adjusted that brings-in their capability to generate good returns.  
  • Risk Factors: Fixed Deposit are known to be the safest with almost no-risk, whilst, mutual fund contains a certain amount of risk as the investment is made in the financial market.  
  • Tax-SavingInvestors preferring Fixed Deposit for tax-saving under section 80C of the Income Tax Act only after the completion of 5-year lock-in-period. Else, can consider ELSS mutual funds scheme as an alternative. Also, ELSS has the shortest lock-in-period of 3 years and has given good returns.  

Yet again, 

Which is better? 

FD or Mutual Funds? 

The final decision to invest between a Fixed Deposit and a Mutual Fund depends on the investors risk capacity and the amount he/she would like to invest. FD requires a lumpsum amount whereas with mutual funds, you can start with as low as INR 500. Follow up with the team of Gulaq to know about best SIP plans.  

Till then, Happy Investing! 



*Mutual fund investments are subject to market risks. Please read the scheme information and other related documents carefully before investing.

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