Fixed deposits are popular investment options offered by banks. You can deposit money for a better rate of interest as compared to savings accounts. It can be a lump sum deposit of money in fixed deposits for a particular period, which could range from 7 days to 10 years.
Once you invest the money with a reliable financier, it begins earning an interest depending on the duration of the deposit. Generally, the basic defining criteria for FD is that the money invested cannot be withdrawn before maturity, however, you could withdraw after you pay a penalty.
What are the features of FDs?
Following are the Key features of FDs:
- Offer stability
- There is no risk of loss of principal
- The market fluctuations do not affect your FDs
- The interest rates are higher
What is a mutual fund?
A mutual fund is formed when capital collected from different investors is invested in company shares, stocks or bonds. Shared by thousands of investors like you, a mutual fund is managed collectively to earn the maximum possible returns.
The total corpus of money that builds up is invested in various asset classes of any type, be it debt funds, liquid assets etc. The principle feature of mutual funds is that exactly like gains and rewards that are earned over the period of investment are shared by the investors in equal proportion, the losses are too.
The distribution is done in accordance with their ratio of the contribution made in the corpus.
What are the Types of Mutual Funds?
The money in the funds is well regulated by SEBI, or the Securities and Exchange Board of India. They are generally of five types:
- Equity funds
- Debt funds
- Balanced funds
- Solution-oriented funds
- Hybrid funds