A Mutual Fund is an investment vehicle made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets.
|Mutual Funds||Fixed Deposits|
|Return earned varies with the market conditions.||They earn pre-specified rates and do not change for entire tenure.|
|In case of redemption within a year, they would be charged exit load maximum of 1%.||In case of premature withdrawals, they have to pay penalty and miss on actual returns.|
|High inflation-adjusted returns||Low inflation-adjusted returns.|
|High liquid.||Low liquid till the tenure of deposit ends.|
|Tax benefit under 80C if invested in ELSS mutual funds.||Tax benefit under 80C for investment in 5 year tax saving FDs.|
1. Equity MF – Nil
2. Debt MF – 20% indexation.
1. Equity MF – 15%
2. Debt MF – Tax Slab
Tax depends on your current slab rate, irrespective of the tenure of Fixed Deposit.
|Debt Mutual funds have more risk. Equity Mutual funds have higher than Debt MF.||FDs have minimal risk.|
|Mutual Funds have the option of monthly investments known as SIP.||In FD it is only has one time investment option.|
|Fixed Deposits||Debt Mutual Fund||Equity Mutual Fund|
|Return (% p.a.)||9.0%||9.0%||9.0%|
|Holding Period||1 Year||1 Year||1 Year|
|Indexed Investment Amount||–||107,500||–|
|Tax Paid (as applicable)||2,700||300||–|
|Post Tax Returns||6,300||8,700||9,000|
|Post Tax Returns (%)||6.3%||8.7%||9.0%|
(The rate of return and rate of inflation is an assumption, for illustration purpose only)