Why is having an FD better than Liquid Funds?

Why is having an FD better than Liquid Funds?

09 November 2023

In the dynamic world of investments, striking the right balance between risk and return is crucial. One perennial debate revolves around Fixed Deposits (FDs) and Liquid Funds, both popular choices for investors seeking stability and reasonable returns. While Liquid Funds offer flexibility, Fixed Deposits stand out as a time-tested and reliable investment option. In this blog, we'll delve into why having an FD might be a better choice compared to Liquid Funds.

1. Predictable Returns

Fixed Deposits offer a sense of security with predetermined interest rates, providing investors with a clear picture of their returns at the time of investment. In contrast, Liquid Funds, being market-linked, may have varying returns based on market conditions. The predictability of FD returns appeals to investors seeking a stable and reliable source of income.

2. Lower Risk Profile

FDs are known for their low-risk nature, making them an ideal choice for conservative investors. The capital invested in an FD is secure, and the interest earned is not subject to market volatility. Liquid Funds, on the other hand, carry a slightly higher risk due to their exposure to debt securities and fluctuations in interest rates.

3. Liquidity with Discipline

While Liquid Funds offer quick and easy liquidity, this can sometimes be a double-edged sword. Investors may be tempted to withdraw funds impulsively, potentially impacting long-term financial goals. FDs, with their fixed tenure and penalty for premature withdrawal, encourage a disciplined approach, discouraging impulsive decisions that may hinder financial planning.

4. Stable Interest Rates

FDs offer fixed interest rates throughout the investment tenure, shielding investors from interest rate fluctuations. This stability is particularly beneficial when interest rates are expected to decline, ensuring that investors continue to earn the agreed-upon interest. Liquid Funds, being sensitive to market changes, may see variations in returns due to interest rate movements.

5. Capital Preservation

Preserving the principal amount is a primary concern for many investors. FDs, with their capital protection, ensure that the initial investment remains intact, offering a sense of security. Liquid Funds, while generally considered low risk, are not immune to market fluctuations, and the capital value may vary based on market conditions.

6. Simplicity and Accessibility

Investing in FDs is straightforward, with minimal documentation and a hassle-free process. The accessibility and ease of opening an FD account make it an attractive option for those seeking a simple yet effective investment avenue. Liquid Funds, while convenient, may involve more complex procedures and documentation.

7. Tax Benefits

Fixed Deposits offer tax-saving options under Section 80C of the Income Tax Act for specified tenures. This can be a significant advantage for investors looking to optimize their tax liabilities. Liquid Funds, while tax-efficient, may not provide the same level of tax benefits as FDs.

8. Diversification within FDs

Within FDs, investors have the flexibility to diversify their portfolio by choosing different tenures and interest payout options. This allows for strategic planning based on individual financial goals and liquidity needs. Liquid Funds, while offering diversification within debt instruments, may not provide the same level of customization.

Unlocking the Potential with INDIE by IndusInd Bank

Now, for those considering the stability and predictability of Fixed Deposits, opening an FD with INDIE by IndusInd Bank is a seamless and rewarding experience. Within just a few minutes, you can initiate an FD and enjoy one of the highest interest rates of up to 7.85% p.a. This elevated interest rate ensures that your investment not only remains secure but also grows at an impressive pace, contributing to your overall financial well-being.


In the ongoing debate between Fixed Deposits and Liquid Funds, the choice ultimately depends on individual financial goals, risk tolerance, and investment preferences. However, the stability, predictability, and lower risk profile of Fixed Deposits make them an appealing option for many investors. INDIE by IndusInd Bank provides a platform where opening an FD is not only convenient but also comes with the added benefit of competitive interest rates, ensuring that your financial journey is secure and rewarding. Consider the merits of Fixed Deposits in your investment portfolio, and unlock the potential for stable, lucrative returns.




Disclaimer: The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information.