Investing in FD is quite safe and Mutual Funds carry a little risk but the return is three times if withdrawn after a long time.
Mutual Funds and Fixed Deposits (FDs) are considered as two of the safest investment options for the people. Investors always try to find the best suitable options for investment and often stumble upon these options. One of the reasons for this is the security and high returns, both at the same time. Both investment schemes have their own advantages and disadvantages. Potential investors are often confused in deciding the right scheme. Let us compare both schemes so that it becomes easier for you to make the right decision in terms of interest.
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FD and Mutual Funds both give returns that differ from plan to plan. It is believed that investing in FD is quite safe but due to the simple interest mode of growth, the increase in the corpus remains slow. On the other hand, Mutual Funds carry a little risk and the return on investment is three times if withdrawn after a long time. Rather than simple interest, Mutual Funds work on compounding which gives interest in the next year on the interest received on your investment in the previous year. This is one of the benefits of mutual funds.
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If an investor decides to invest Rs 10 lakh to make FD for a maximum period of 10 years then the return expected will be in the range from 6 to 6.99 per cent. This interest rate is mostly the same for private and government banks. For 10 years, the interest amount will be added which will sum up to Rs 9,82,019. After a maturity of 10 years, you will get a total of Rs 19,82,019 from the bank. Hence, investing in FD can give you a return of almost double the principal amount.
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In Mutual Funds, if you invest Rs 10 lakh in lump sum, then after 10 years, you could get an average return of 12 per cent annually. On this return, your accumulated money withdrawal after 10 years will be around Rs 31.06 lakh. Hence, you will get Rs 21.06 lakh as interest and your many will become triple the principal amount.
