Fixed Deposit interest rates fell to 5.5% after the economy crash due to COVID-19. All the banks decided to give 5.5% interest rates to investors. This blew the minds of many investors as the inflation rate is around 4.5 %.
Earlier some people were dependent on the interest of their Fixed Deposit. But now the news of low rates put up a wrinkle of tension on their face.
And now the people who were afraid to enter into the Market Schemes, are now rushing towards the stock market or mutual funds to fetch some great amount of returns.
Fixed Deposit vs Mutual Funds
Fixed Deposit – It is a type of investment tool offered by banks to their customers which involves giving of interest rates of approx 5.5%(latest) per annum on customer’s deposit.
Advantages –
- It is risk-free investment.
- Fixed Rate of interest.
Disadvantages –
- Low interest rates.
- All money to be deposited collectively.
Mutual funds – It is a type of investment scheme offered by different financial institutions to its investors for taking part in our economy.
Advantages-
- High Returns.
- No fixed amount of investment.
- highly affects our economy in a positive way.
Disadvantages-
- Some amount of risk in short term.
- No fixed returns.
Should you start investing in Mutual Funds?
Yes, we should definitely start investing in mutual funds because it yields a great amount of returns in long term. And there is myth that it will yield return in negative figures but that’s not true. Mutual funds can yield an average of 15% over long term investments and with proper selection no one would be in a loss in future. And on the other FD’s are now giving 5.5% percent which is not good as we have to consider the inflation rate ie. around 4.5% .
So the Final advice is go with mutual funds or Index funds coz it will give returns of around 12-13% after inflation and whereas FD’s will yield only 2-3% after inflation.
Thanks for Reading.