I have seen lot of people including myself asking this question that in India, which is better, Mutual Funds or Fixed Deposit. Lets say for one year period, you get 7.5% interest rate on 1 lakh rupees than is it good or should you take more risk and invest in mutual funds ?

I have invested money in both in the past and currently have 3 mutual funds of ICICI, HDFC and SBI as well have money in fixed deposit too in HDFC and ICICI banks, so from my experience this is what I can suggest -

If you are looking for No Risk

Go with fixed deposit option, 7.5% interest rate is not bad at all as on average investing in property or stock market too gives same return (assuming you have no time to spend and no knowledge about them) on average. Having money in fixed deposit is the best option for you if you don’t want to lose even 10% of your money.

Small Rick Decent Return

If you are willing to take some risk and can look for 2+ year range, I will advice you to go with mutual funds, Right now the stock market is at its peak (BSE at 17600) so you won’t get any return from mutual funds in say next 3-6 months.

Mutual funds will always outperform fixed deposit in long run of 3 and more years provided you trust the manager of fund and don’t get panicked when the market take deep dives. For example, a friend of money had invested 3 lakh in Mutual fund in 2008 when the market was its all time high (I am not sure why he did that ? probably was thinking it to touch 25000), the market took a nose dive to 7000 and the value of his mutual fund became 80,000 though after 2 years he has recovered all his value.

High Risk High Return

If you are looking for high risk high return investment, you should stick to Mutual funds or better, jump in stock market (but with very small amount of money, say Rs 2000 or 5000, Never put big money), but again, only invest in mutual funds if you can resist selling it for few years.

Related posts:

1. Best Fixed Deposit Account among HDFC, ICICI, SBI If you are looking to make a fixed deposit account...
2. About Reliance Mutual Funds Mutual funds are primarily a collective investment plan in which...
3. How to save Taxes in India So we are in the summer of April and people...
4. How to get Credit Card from Indian Banks like ICICI, HDFC, AXIS Bank If you are looking to get fast Credit card from...
5. ICICI ULIP Fraud - DO NOT buy ICICI ULIP SEBI has stop banks issuing anymore ULIP policies (I am...