Among different investment schemes, some are fixed-income instruments and some are market-linked. Both have their own place in wealth creation and help investors to meet their financial goals. Market-linked instruments have the potential to provide high returns but they carry high risks also. Fixed income investments like fixed deposits help to accumulate and keep corpus safe to meet the desired goal. Let us find differences among different investments and associated risks with them so that you can identify where to invest money efficiently.
- PPF Account vs. Fixed Deposit Account
Public Provident Fund (PPF) tenor is lengthy i.e. 15 years. There is no flexibility in the tenor. PPF is often selected by investors looking to accumulate savings for their retirement. It is a safe option with assured returns. Whereas fixed deposits (FDs) are flexible in terms of the tenor. Investors can choose the tenor of 7 days to 10 years as per their financial goals.
PPF accounts are restrictive in terms of investment amounts. Investors can deposit Rs.1.5 lakhs in a financial year. On the other hand, FDs are flexible in terms of the investment amount. With Bajaj Finance FDs, you can invest from Rs.25,000 to 1 crore for any tenor between 12 – 36 months.
Investors cannot withdraw money from their PPF account before maturity but premature withdrawal is allowed for FDs.
If you are ready to keep your savings locked for 15 years, choose the PPF scheme. If not, then choose a flexible tenor for your FD account.
- Senior Citizens Savings Scheme (SCSS) vs. Fixed Deposits
SCSS are specially for senior citizens of 60 years or above. Where they can invest for 5 years and renew it further for 3 years.
Whereas fixed deposits are not restricted to senior citizens. Individual of any age can open an FD account. Minor account facility is also available for FDs. Parents or guardian can open FDs for their minor children.
Investors are limited to invest a maximum of Rs.15 lakh in SCSS. The investment amount should be in multiples of Rs.1,000 only. Whereas FDs are not restricted to a maximum limit of 15 lacs and multiples of Rs.1,000.
To invest in the SCSS scheme, you need to go to authorized banks or post office. Whereas Bajaj Finance FD account can be opened online in easy steps. Moreover, you can earn an additional interest rate benefit of 0.10% if you invest online in Bajaj Finance FD.
- Mutual Funds vs. Fixed Deposits
Return on Investment: Mutual Funds are market-based instruments that invest in debt or equity market. There are no fixed and guaranteed returns. However, investors with enough patience can earn pretty higher returns in the long run.
On the other hand, fixed deposits are a fixed-income instrument that offers fixed and stable returns.
Risk Factor: Mutual Funds contain high-risk. Different types of mutual funds are debt mutual funds, equity mutual funds or balanced mutual funds. You can invest in different mutual funds as per your risk tolerance capacity. Note that mutual funds are subject to market risk and considered risky investments.
On the other hand, the rate of return on FDs is pre-decided and market forces like inflation cannot impact your return once it has been fixed in FD account. So, FDs are considered as risk-free investments. For example, with CRISIL’s FAAA/Stable rating and ICRA’s MAAA/Stable rating, Bajaj Finance FD offers the assurance of guaranteed returns.
The Bottom Line
Investing is extremely important but where you are investing is more important. Accumulate a reserve for emergencies but also plan for retirement. Often most investors want a lower risk investment option. FD benefits regardless of your risk profile. So, fixed deposits are for you because the stock market can offer you higher returns but not guaranteed returns.