You may have come across a lot of articles and videos that says mutual funds are now better than FDs. Or rather mutual funds (or stocks) offer better returns than FDs.
Thanks to dropping interest rates. One-year bank FD rates are currently in the range of 5.25%-7.00%, but if you’re placed in highest tax bracket (of 30%), a paltry sum is earned. This further gets eroded when inflation is also accounted.
Since the net return is less than inflation, you will end up saving less than what your needs are i.e.: prices will always grow faster than your savings. So, the effective real rate of return (also known also as inflation-adjusted return) has clearly become unimpressive. That’s why everyone is pushing equity because it’s an inflation beater.
I created this post seeing the way Mutual Funds are now selling their funds. Perhaps that explains the reason why wealth in stocks is nearing FDs for the first time in India. Its reason is obvious too. Gold and FD rates are coming down. In FY 17, Indians invested 8 lac crores in stocks compared to 3.4 lac crores in FDs. Total wealth in equities are at 37.6 lac crores compared to 40.2 lac crores in FDs.
But what you need to know is. ZERO IS GREATER THAN MINUS. You will never lose your capital investing in FD.
* Fixed rate of interest / Assured rate of return
* Save taxes when you invest for 5 years — but returns are taxable
* No costs invovled / Zero charges
* Low returns
* High returns high risk
* Tax free dividend
* Inflation beater
* High risk
* Monitor stocks and funds
* Entry/exit fees / Brokerages
Video / Malayalam
I hope you have learned a thing or two from my new video. If so, do share my video with your friends and family on your social media channels!
Happy Investing/Trading! 🙂