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Mutual Funds vs Fixed Deposits

Updated: 6 days ago

Mutual Fund vs Fixed Deposits
Mutual Fund vs Fixed Deposits

Thanks to the “Mutual Funds Sahi Hai” campaign there’s a greater understanding of Mutual Funds in India these days. However, when it comes to the details, most of us still find it very difficult to comprehend. This complexity leads to most of us settling down for relatively easier and more prevalent investment alternatives like FD & Real Estate.

In this article, we compare Mutual Funds against Fixed Deposits on the parameters we think are most important. Please be cautioned that this is not the exhaustive list of differences and one should always consult a Registered Advisor/ distributor to understand the investment options best suited for oneself.

Mutual Funds

Fixed Deposits



RBI - Reserve Bank of India

Safety of Capital

Most of Mutual Funds do carry Volatility. This said you can choose a fund that suits your risk profile. It is advised to hold Mutual Funds for 10+ Years to minimize investment risks.

Yes, largely. Plus, DICGC providesa guarantee of upto Rs. 5 Lacs


Largely higher than FDs - Depends upon the Type of Funds & Holding period.

Generally lower, fixed but guaranteed returns.


0.1% - 2.5%

No expenses occur during the tenure

Lock-in period

No (Except for Closed Ended Funds)

Yes - Largely amount is locked for Investment Tenure.


The amount can be withdrawn anytime from Open-ended schemes. Exit Loads are applicable for up to 1 Year of Investments.

Premature withdrawal could invite a penalty.

Offered by

Asset Management Companies

Banks and NBFCs


Higher Liquidity profile

Relatively restricted liquidity profile

Minimum Investment



Mutual Funds generally are better alternatives if you have a longer investment horizon of more than 10 Years. Mutual Funds also offer better ways of transacting Like SIP (Systematic Investment Plan), STP (Systematic Transfer Plan) & SWP (Systematic Withdrawal Plan). More on these in our next blog.

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