What is the difference between Fixed Deposit and Mutual Funds?

Welcome dear friends to the Fastread blog, today we cover these topics What is difference between Fixed Deposit and Mutual Funds, difference between Fixed Deposit and Mutual Funds, What is Fixed Deposit, What is Mutual Funds, Fixed Deposit Vs Mutual Funds in this article.

In this article we will tell you what is fixed deposit and mutual funds? Along with this, we will also tell you what is the difference between fixed deposit and mutual funds? We hope that you will like this article very much, because this article is especially for those people. Those who want to save some rupees from their monthly income for their future. But they do not understand where to invest their hard earned money? So that they get maximum return in future, because if not today then tomorrow we all need money.

In today’s date, almost every person saves some money from his income. But most of the people keep their money in their bank account only, you get 3% to 4% interest on the money present in these savings bank account. But this interest rate is very low, because every year inflation increases at the rate of about 6%.

Therefore, if seen, instead of profiting from the money saved in your savings account, you are incurring loss. That’s why it becomes very important that we invest our money in those plans. Where you get more than 6% interest rate, in such a situation, if anyone comes to mind first. So that is mutual funds and fixed deposits, which we also call FD in short.

But most people do not know much about Mutual Funds, almost every person would probably know about FD. But the question is, what is the difference between FD i.e. fixed deposit and mutual funds and how much interest rate you can get on your savings money. So friends, you stay with us and read this article completely from beginning to end. What is the Difference Between Fixed Deposit (FD) And Mutual Fund

What is Fixed Deposit (FD)?

Friends, as you can guess from its name itself, in this you have to invest a lump sum amount for a fixed time period at an already fixed interest rate. If you want, you can fix Rs 5000 or Rs 5,00,000 or you can fix as much amount as you want. It is invested for a fixed time period, in which the bank gives you a fixed interest rate.

Once you make a fixed deposit of any amount, then it cannot be withdrawn before its maturity date. But if there is an emergency in your house or you need money a lot, then you can withdraw money from your fixed deposit. But for this you have to go to the bank and tell the bank why you want to break your FD.

After which the bank charges some of your fixed deposit which is taken by the bank from you as a fine. After deducting his charges from your fixed deposit amount, he transfers the rest of the money to your account. But we suggest you that when you make a fixed deposit, then you should do it thoughtfully, because if you withdraw money before maturity date, you will not gain but lose.

Most of the people suffer loss due to lack of correct information about fixed deposits, there are many such financial institutions in India that provide you FD service. In the rest of India, almost every bank provides you with fixed deposit service. You can do any fixed deposit from 1 week (weeks) to 10 years (years).

You get different interest rate in the fixed deposit scheme of different banks, so you should get FD done in the same bank or financial institution. Which should provide you maximum interest on your deposited money, because in FD you get interest rate ranging from 4% to 11%.

To get FD done in any bank or financial institution, it is very important to give your address proof, identity card, and pan card. If you want to know that after how many years the amount of fixed deposit done by you will be doubled.

So for this, the interest rate you are getting on your deposited amount, divide it by 72. By doing this, the amount deposited in your fixed deposit will double in that number of years, whatever the result will be. For example, suppose your bank is giving you 9% interest rate on your fixed deposit, then you will get 72/9 = 8, this means that it will take 8 years for your deposited fixed deposit to double.

What is Mutual Fund?

As we get to know from its name that this is a kind of fund, now the question is, what is a fund? It is called Friends funds, when many people together invest in the same place, then it is called funds. So does it mean that fixed deposit is also a fund? No friends, only your money is invested in fixed deposit, whereas if many people invest their money in any one fund, then it is called fund.

Many people and investors add their money to such funds, then after that invest these money in fund manager, share market and bond market. The fund manager divides all those money equally into two parts, after that he invests one part in the share market and the other part invests in the bond market.

Mutual funds are invested in many ways, out of which the share market and bond market are considered to be the most important markets. Apart from this, mutual funds also invest in gold and other commodities. Apart from this, where you have to open a demat account to invest in the share market. To invest in the same mutual fund, you do not need to open a demat account.

Let us explain this to you with an example, suppose 10 of your friends buy a piece of land together. The cost of that piece of land is Rs 6 lakh, now if you divide this fund into (600000/20 = 30000) 20 rupees per unit, then 30000 units are made. Now investors can buy as many units as they want, suppose you have 3000 rupees at this time, then you can buy only 150 units of this unit.

Now in the same proportion, now you will also become the owner of the land which was bought by 10 friends together. Now suppose that after a few months or a year, the value of the land purchased for that Rs.6,00,000 increases to Rs.10,00,000. So now the unit price of this investment increases to Rs 30 instead of Rs 20.

In this case, your investment will become 150 * 30 = Rs 4500 according to 30 rupees per unit. In this way you are getting a profit of Rs 1500, as you can see that an investor is also known as a unit holder in this. The biggest advantage of Mutual Funds is that even if you cannot invest a large amount, you can start your investment by starting with a small amount.

Apart from this, another advantage of mutual funds is that you do not have to think about where you should invest your money so that they increase. Rather, this work is done by mutual fund experts, they would have known very well when and where to invest customers’ money so that customers can get maximum profit.

Difference Between Fixed Deposit (FD) And Mutual Fund

(1) Investment of Mutual Fund always depends on the up-down of the market, so the risk in Mutual Fund is high. Whereas Fixed Deposit remains the same and in this you get back the same amount of money which is promised to you.

(2) Rate on Investment i.e. ROI in Mutual Fund depends on the up-down and change of the market. Whereas Rate On Investment (ROI) in Fixed Deposit (FD) remains the same i.e. Fixed.

(3) There is high risk in Mutual Fund whereas there is no risk in Fixed Deposit.

(4) If the share market falls then it can cause you a loss, whereas it is not so in the fixed deposit.

(5) Mutual fund does not have an assured rate of return, while the fixed deposit rate of return is fixed.

(6) The higher the risk you take in a mutual fund, the more there is a chance of profit or loss. Whereas nothing like this happens in fixed deposit.

(7) Where you invest little by little in mutual funds, in the same fixed deposit you have to fix a large amount at once.

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