A mutual fund is a financial vehicle made up of a pool of money collected from various investors. The money is then invested in securities such as a bond, stocks, shares, and various money market instruments. Each investor participates proportionally in the journey of gain or loss of the fund.

A fixed deposit is a financial instrument offered by banks and NBFCs where an investor can deposit their savings to earn a higher rate of interest. It is one of the most popular ways of savings because it offers the highest amount of interest in comparison to other instruments.

The returns on investment can be calculated with the help of a Mutual Fund Calculator, which can be found at https://money.mobikwik.com/calculators/sip-calculator. The calculator is a very powerful tool that helps to determine the fixed amount of return periodically in the selected mutual fund. It can help to determine the choice of investment. It keeps you aligned with the profit generated through your scheme.

Here is a list of few factors that determine whether to invest in Mutual funds or Fixed deposit:

  • Rate of returns– Mutual fund returns are subjected to market risk. The return totally depends on the performance of the stock market. Whereas, a fixed deposit offers a predefined rate of return regardless of market performance.
  • Involvement of risk– The risk involved in investing on mutual fund depends on the amount of investment. One of the great benefits of investing in FDs is that it involves zero risks. The investor will always get the promised amount of return.
  • Expenses– In order to maintain the fund, mutual fund investors have to pay certain charges and expenses. In the case of FDs, the investor does not have to pay any expenses over the course of initiation or tenure of the deposit.
  • Withdrawal- The investor can withdraw from mutual from without any charge after a certain period. In the case of withdrawal before the date, the investor will ve levied a charge of 1% in the form of exit load. In the case of FDs, if the investor wants to withdraw the amount before the date of maturity, the deposit will breakdown. They will also have to pay the penalty for the same during premature withdrawal.
  • Tax benefits– All the mutual funds are subjected to short term and long term capital gains tax. STCG is an amount charged at a flat rate of 15% whereas LTCG is charged at 10% of the earnings above 1 lakh. In the case of debt funds, LTCG is 20% post indexation. Whereas FDs are subjected to 10% TDS on interest above Rs. 10,000 that the investor earns in a particular year.
  • Impact of inflation– While Mutual Fund returns are flexible as per the adjustments of the rate of inflation. It enhances their capability of generating better returns.whereas fixed deposit remains unaffected from the fluctuations in the inflation rate. It is because the rate of interest is already fixed by the government of India that cannot be changed upon any factor.

Hence, the investor needs to check the current rate of returns in the mutual fund. If the market is doing well at the given point of time, the rate of interest might be more. Otherwise, fixed deposits will always be the safest instrument for investment.