Have you heard your parents or grandparents say that “Let’s open an FD”?
The question is why did Gen X was so faithful to accumulating their money in a fixed deposit?
Well, FD back then was a great hit. Fixed
deposits have always been a risk-free investment arena. It was once the case
that FDs doubled in 6 years, giving an average return of 12%. In the past,
people used to invest for ten years or more. As an example, if your
grandparents had invested 3 lakhs for 10 years at 12%, their investment planner
would have matured at 9. 78 lakhs.
The
days of such interest from FDs are sadly gone!
In
recent years, mutual funds have become increasingly popular among investors. It
gives great returns when it comes to long-term investments. The best part of
starting a mutual fund investment is its way of investing. You can either
invest via SIP ( Systematic Investment Plan) or Lumpsum.
However,
SIP is best when you wish to start your investment journey with a small amount.
Mutual funds are a great investment source to beat rising inflation. They
provide inflation-beating returns!
There
are several reasons why people may be more interested in investing in mutual
funds rather than traditional fixed deposits (FDs) in a bank.
Here are some of the main reasons:
- Potential for Higher Returns:
One of the key reasons why people are attracted to mutual funds is the potential for higher returns. Unlike FDs, which offer a fixed rate of interest, mutual funds invest in a variety of assets such as stocks, bonds, and other securities, which can generate higher returns over the long term.
- Diversification:
Mutual funds also offer investors a way to diversify their investments across a range of assets and sectors. This can help to spread risk and reduce the impact of any single investment performing poorly.
- Professional Management:
Mutual funds are managed by professional fund managers who have expertise in selecting and managing investments. This can be particularly beneficial for investors who may not have the time, knowledge, or resources to manage their investments on their own.
- Flexibility:
Mutual funds offer investors a range of options to suit their individual needs and investment goals. For example, investors can choose between different types of funds, such as equity funds, debt funds, or hybrid funds, depending on their risk tolerance and investment objectives.
- Ease of Access:
Investing in mutual funds has become increasingly easy and convenient, thanks to the growth of online platforms and mobile apps that allow investors to purchase and manage their investments from anywhere.
- Tax Benefits:
Some types of mutual funds offer tax benefits to investors, which can make them a more attractive investment option compared to FDs. The best tax saving option available under the mutual fund is ELSS (Equity Linked Saving Scheme). Taxpayers can claim up to Rs. 1.5 lakh of deduction under Section 80C of the Income Tax Department.
- Liquidity
Another entitlement of mutual funds is its liquidity process. From buying to selling the process is hassle-free.
BOTTOM LINE:
While FDs in a bank offer a safe and stable
investment option, they may not provide the potential for higher returns or the
diversification benefits that mutual funds can offer. As a result, many
investors are turning to mutual funds as a way to grow their wealth over the
long term.
However, it's important to note that mutual funds do carry some degree of risk,
and investors should always do their research and consult with a financial
advisor before making any investment decisions