The financial market, with its plethora of saving avenues, can appear perplexing to new investors. Understanding your options can be quite overwhelming, thus the need to delve into specifics, like comparing the allure of fixed deposits (FDs) against that of mutual funds.
This article elucidates on how to adjust your investments using an FD vs mutual fund calculator, where FD meaning stands for fixed deposit and the emphasis is on the significance of knowing the impact of your investment on the value of your capital.
Fixed Deposits and Mutual Funds: An Overview
An FD (fixed deposit) is a financial instrument where you deposit a lump sum of money with a bank or a financial institution for a selected duration. The depositor receives a higher interest rate than a regular savings account until the given maturity date, thus making it a prevalent and low-risk form of investment in our country.
On the contrary, a mutual fund is a type of investment vehicle consisting of a portfolio of stocks, bonds, or other securities. Mutual funds pool money from several investors to invest in a diversified range of assets. They are managed by professional fund managers who aim to generate high returns for the investors. The risk in mutual funds varies with the asset class and management style.
Navigating the ‘FD vs Mutual Fund’ Dilemma Using Calculators
To make an informed investment decision, using an FD vs mutual fund calculator could come in handy. These calculators allow you to evaluate your potential returns on a fixed deposit and a mutual fund by taking into account various factors such as the investment amount, tenure, expected return, and the tax implications.
Here’s how you can adjust your investments using these calculators:
Using an FD calculator: An FD calculator will need the deposit amount, tenure, type of fixed deposit (cumulative or non-cumulative), and the interest rate. Let’s say you deposit INR 1,00,000 for five years at an interest rate of 7% compounded quarterly. The maturity amount calculated by the FD calculator would be around INR 1,40,256.
Using a Mutual Fund Calculator: A mutual fund calculator, otherwise known as SIP (Systematic Investment Plan) calculator, needs the SIP amount, tenure, expected return, and investment frequency. Suppose you decide to invest INR 5000 every month for a period of 5 years, expecting a return rate of 12%, your maturity amount after the said period calculated by the Mutual Fund calculator would be approximately INR 4,14,111.
The decision between an FD and a Mutual Fund investment depends on your financial goals, risk tolerance, and investment horizon.
Disclaimer:
Investing in the financial market, be it via FDs or Mutual Funds, brings its own set of risks and rewards. All investors are advised to understand the potential outcomes, read all related documents carefully and seek expert advice for customized recommendations.
Summary:
Understanding the labyrinth of investment options can be hard for inexperienced investors. Thus, it’s essential to grasp the specifics of your options, like Fixed Deposits (FDs) and Mutual Funds. The use of an FD vs mutual fund calculator can be crucial as it helps evaluate potential returns from these investment avenues. By entering details such as investment amount, tenure, expected return, these calculators estimate the maturity amount. However, investors need to gauge the risk and reward before deciding between them. Remember to read all related documents carefully and seek expert advice for a customized recommendation.
