Investing in financial schemes has been the new trend that people blindly follow without making the reasons particular. Eventually, this move has the potential to shatter one’s financial stability. This article has come up with yet another lesson of finance scheme and that is distinguishing between debt fund and fixed deposit. Are you all curious about it? Then stay tuned to the write-up and encounter pointers which can help you have a clear difference between the debt fund and fixed deposits. As the debt fund has arrived as a major rival to the FD, let’s find out where actually the difference lies:
The primary areas of difference which are observable are safety, returns, liquidity, taxation, etc.
The safety concerns:
How is it possible that you are investing your sums somewhere and you are not concerned about the safety of the investment? The deposits of the bank are the safest avenues of investment for the investors and there is the least chance of default.
But the debt funds are similar to those of the mutual funds. There is no such claimed guarantee on returns. The returns in such cases are completely dependent on the condition of the market. The fund industries as a whole are closely governed by SEBI which is an abbreviation to the Securities and Exchange Board of India. The maturity profile of the fixed deposits is guaranteed ad thus, they become the safer form of investments.
The taxation part:
Another big difference that lies in between both of them is taxation. The fixed deposits of the bank have fixed returns to offer. They have something to add on to the normal income. Above all the banks also cut TDS from the returns availed. But on the other hand, the returns of the debt funds are held to be more than 36 months. The returns availed from such funds are even classified as the most lucrative returns. They are taxed 20 percent by the bank as indexation.
The liquidity of the investment is even one of such major points to be focused when it comes to the differences between the debt and the fixed deposit. The debt funds are credited in the accounts within a period of three to four working days given that, the factors like weather condition in support
The debt funds can help beat the bank. Investors can make an assumption of both risks of credits and interest rates. Thus, it is important that one has the right idea of the risk factors involved and hence higher returns can be compensated by knowing the right fund to invest your sums in.
Hence, this is all that readers must know about the Debt fund and FD. The bank deposits have always been an affair of choice for investors. With the availability of endless schemes, it is somewhere becoming harder for men to find the right one to strike the right balance. You will amidst nowhere if you ever choose a financial scheme to invest your hard-earned sums.