Fixed Deposit vs Mutual Fund

Fixed Deposit vs Mutual Fund

06 May 2024 | By INDIE

In the world of money matters, almost every individual feels like standing at a crossroads with different paths. Right there, you see two big options: mutual funds and fixed deposits.

You can think of mutual funds and fixed deposits as two roads leading to your financial goals. Each road has its own twists and turns, offering different benefits and risks. Comparing mutual funds vs. FD might seem like solving a puzzle. In this blog post, we're going to. We'll explore what makes each option unique and what benefits they offer.


What are Mutual funds?

Mutual funds are collective investment vehicles pooling money from investors to invest in a diversified portfolio of stocks, bonds, or other securities. Professional fund managers have the responsibility to manage these funds and make investment decisions on behalf of the investors.

Here are some of the key features of mutual funds:

● Diversification

Your money will be spread across various assets, reducing the risk associated with investing in individual securities.

● Professional Management

Skilled fund managers oversee the investment decisions, aiming to achieve optimal returns for all investors.

● Liquidity

You can typically buy mutual fund units at the fund's net asset value (NAV) on any business day. In terms of mutual fund vs. fixed deposit comparison, this liquidity angle forms a striking difference.

● Accessibility

Mutual fund schemes also offer access to various asset classes and investment strategies, catering to different risk profiles and investment objectives.

● Transparency

Fund managers disclose information about the fund's holdings, performance, and expenses regularly, ensuring transparency about your investments (whether one-time or SIP).

● Affordability

You can start investing in mutual funds with relatively small amounts. The low threshold criterion makes them accessible to a wide range of investors.


What are Fixed Deposits?

Fixed Deposits, commonly known as FDs, are a popular investment option banks and financial institutions offer. They involve depositing a specific amount of money with a bank or financial institution for a predetermined period, known as the FD tenure. During this period, the deposited amount earns interest based on FD rates agreed upon at the time of opening the FD.

Some of the key features of Fixed Deposits are as follows:

● Fixed returns

As a part of mutual funds vs. FD comparison based on returns, FDs offer interest at fixed FD rates throughout the tenure, thereby providing you with predictable returns.

● Term flexibility

You can choose the tenure of your FDs, ranging from a few months to several years, based on your goals and liquidity requirements.

● Low Risk

If you want to select between FD or mutual fund based on risk involved, you can consider FDs to be low-risk investments as they are typically backed by government guarantees or bank assurances.

● No Market Fluctuations

Unlike investments in stocks or mutual funds, the returns from Fixed Deposits are not subject to market fluctuations, providing stability to investors.

● Interest Payment Options

You can also opt for periodic interest payouts (monthly, quarterly, or annually) or choose to reinvest the interest earned to enhance the overall returns.


Recommended Read: How to enhance liquidity in FDs?


Mutual Funds vs. FD: Comprehensive Comparison



Mutual Funds

Fixed Deposits

Type of Investment

Pooling of funds from multiple investors

Individual deposits with banks or institutions

Investment Objective

Potential for capital appreciation and growth

Capital preservation and fixed returns

Risk Level

Moderate to High



Varies based on market performance

Fixed, predetermined rate of interest


Generally high; units can be bought/sold daily

Limited; withdrawals may incur penalties


Offers diversification across various assets

Limited diversification; focused on fixed income

Investment Tenure

Can vary from short to long term

Predetermined duration

Tax Implications

Tax-efficient options available

Interest income subject to tax

Regulatory Oversight

Regulated by Securities and Exchange Board of India (SEBI)

Regulated by banking authorities


Thinking of selecting FD over mutual funds? Start an INDIE Fixed Deposit today!



The information provided in this article is generic and for informational purposes only. It is not a substitute for specific advice in your 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 making any financial decisions based on the contents and information.