FD vs Debt Funds: FD or Debt Fund, in which your money will be safe and you will get good returns? know..

Before investing, a person usually considers two things. First, whether his money will be safe or not, and second, how much return will he get. If we talk about safe investment, even today most trust is on fixed deposit. However, debt funds are also considered to be low-risk investments.

Let us know which is better for investment in FD and debt funds and which one will give you more return.

Advantages and disadvantages of investing in FD
The best thing about FD is that your capital remains safe and you also get guaranteed returns. This is the reason why most people invest in FD. A large number of them are retired employees, who invest the lump sum money received after retirement in FD.

But, the problem with FD is that it gives less interest than many other investments. There is a danger of such a situation coming when the interest of FD does not even beat inflation. This directly means the loss of your principal.

Most government banks in the country give 6.5 percent annual interest on FDs. Talking about private banks, this figure is around 7 percent. On the other hand, during the last five years, the average annual inflation rate in the country has been five percent or more. According to this, the net return of FD will be nominal.

How will be the investment in debt funds?
A debt fund is a scheme of mutual funds. But, instead of the equity market, it includes fixed-income assets like corporate bonds, government bonds, and money market instruments, which ensures fixed returns with safe capital like FD.

Data from the Association of Mutual Funds in India (AMFI) shows that the 5-year average annual return of direct plans of the top 5 medium-duration debt funds has been quite good. About 7.41 percent to 9.55 percent. Debt funds with short duration are considered to give more secure and stable returns. Their 5-year average annual return was also 7.46 percent to 8.25 percent.

Is FD better or a debt fund?
It completely depends on your needs and convenience. However, in some cases, debt funds are better than FD. Debt funds have more liquidity. This means that you can withdraw money by selling your units whenever needed. There is no penalty like FD.

If your focus is on keeping 100% capital safe, then you can invest in FD. But, to beat inflation, you can also put some part of your money in a debt fund. However, you should bet on short-term funds as compared to long-term debt funds, as they are more stable.

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