Fixed deposit or FD is the most convenient and traditional option of investment where people consider it is safe and offers fixed returns. Though Fixed Deposit is an easy investment option for all, however, the returns of fixed deposits being taxable are much less as compared to a Debt Fund.
In FD bank provides assurance of capital safety and is risk free investment. In case a bank defaults, investors’ deposits – both principal and interest are guaranteed up to Rs 5 lakhs i.e. even if a bank defaults investor will get up to Rs 5 lakhs. If your investment is more than Rs 5 lakhs, then investor may not get any compensation for the loss exceeding Rs 5 lakhs..
Debt mutual funds invest in debt and money market instruments like, commercial papers, certificates of deposits, corporate bonds, Government bonds etc. Debt funds are subject to market risks and there is no assurance of capital safety. There are two kinds of risk in a debt funds – interest rate risk and credit risk.
