Best of investment option
Investment Guide: When it comes to investment among small investors, fixed deposits (FD), index funds and Debt Funds are the most common options. Although all three have their own advantages, choosing the right investment depends on your financial goals, risk-taking ability and investment period. Let us know which of these three is the best option for you?
What are index funds?
The index fund is a type of mutual fund that tracks the performance of a particular market index, such as the Nifty 50 or Sensex. These funds mimic the index by placing stock in the same proportion of benchmarks. Since index funds are passively managed, they come with less expense ratio than actively managed mutual funds. It is considered a great investment option for small investors. To invest in index funds, you need a demat account, which can be opened through any brokerage platform by meeting KYC requirements. Essential documents include PAN card, evidence of identity, proof of address and a picture.
Fixed deposit
On the other hand, fixed deposits are one of the safest investment options in India. They give guaranteed returns over a certain period, which makes them ideal for investors who do not risk. FD is quite popular among small and senior citizens in the country. All investors invest money in FDs to avoid market fluctuations. They get a fixed return in FD.
What is a date fund?
Date fund is a type of mutual fund that mainly invests in fixed income securities, such as government bonds, corporate bonds, treasury bills, debentures, and other loan equipment. These funds are suitable for investors who want low risk and stable returns.
Who is better?
Specialty Index Fund Fixed Deposit (FD) Date Fund Fund Return 10-15% (in Long Term) 6-7% (Fixed) 6-9% (Flexible) Risk No more Liquidity Medium (1-3 days withdrawals) Low (penalty on premature withdrawal) high (no time withdrawal) tax benefits after 1 year 10% LTCG tax interest is to be taxed on tax interest after 3 years, low tax investment period with indexation 5+ year 5+ year 1-5 years 1- 1- 3 years investor seekers seeking high risk -taking safety returns
Which of these three better investment options?
If your investment goal is of long term (5+ years) and you want to return, then choose index funds. If you want fixed returns without any risk, then choose a fixed deposit (FD). If you want better returns and liquidity than bank FD, but want to take less risk then choose a date fund. If you want tax benefits and you can invest for 3+ years, date funds can be better.
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