Fixed Deposits vs Stocks vs Mutual Funds: What's the difference| North Loop Official Blog
North Loop Logo
North Loop
15 Oct 2020

Fixed Deposits vs Stocks vs Mutual Funds: What's the difference

thumbnail for Fixed Deposits vs Stocks vs Mutual Funds: What's the difference
Credit: North Loop

Investments are of utmost importance to people looking to grow their money to meet their financial goals. Investing money also helps provide a cushion of safety against unforeseen financial expenses that arise in the future. Depending on the degree of risk an individual is willing to get exposed to, potential investors have a wide range of investment instruments to choose from.
An individual’s choice of investment may vary due to various factors like age, income, risk profile, investment tenure, expected returns, etc.

These factors lead a potential investor to the first question- “What should I invest my money in?” There are three major avenues through which an investor can invest their money- Fixed Deposits, Mutual Funds, and Stocks.

Stocks, Fixed Deposits, or Mutual Funds?

A stock is a type of securities that represents a percentage of ownership of a company, directly proportional to the number of stocks owned. Companies raise money through the listing of shares to the public in exchange for returns that directly depend on the financials of the company as well as the stability of the securities market.

Fixed Deposits are savings instruments, offered by banks to individuals in pursuit of parking their surplus cash in exchange for stable returns. Fixed deposits are not exposed to the securities market, hence are relatively immune to factors like inflation and market downturns, providing stable returns. However, the returns offered by FDs are significantly lesser than securities based instruments

Mutual funds are market-linked investment instruments wherein fund managers pool in money and invest in securities like equities and bonds, depending on the goals and requirements of investors. Despite offering no fixed rate of returns, when the securities market is performing well, mutual funds offer some of the best returns across all investment instruments, especially from a long term perspective.

Start investing for free with North Loop and get personalized recommendations

Fixed Deposits vs Stocks vs Mutual Funds: What's the difference?

Particulars Stocks Fixed Deposits Mutual Funds
Risk FactorsHighLowHigh
Assurance of ReturnsNo Fixed Amount of returnsHigh assurance of returnsNo Assurance of returns
Rate Of ReturnsDepends on the sector, market stability and performance of the company.Depends on the duration of the FD (Lock-in period) as well as type of FD.Depends on the portfolio of mutual funds (type of securities invested in, matrket volatility, etc.)
Return on InvestmentVaries from stock to stockPre decided and Fixed returns offered on investment. Better returns offered on long term mututal funds.
Impact of Infaltion and Market VolatilityHigh ImpactNo ImpactHigh Impact
LiquidityHigh Liquidity FDs can be prematurely withdrawn but a penalty is levied.Mutual Funds can be prematurely withdrawn but an exit load is charged (if done before a stipulated time).
Additional ExpensesStock brokers charge money as per discretion of the brokerNo additional expenses are chargedAdditional expenses are charged for managing mutual funds.

Bottomline-

For the ones looking for investment instruments that hedge inflation and market volatility linked risks, Fixed Deposits certainly are the right way to go, offering highly stable returns over the tenure of the FD. However, the returns offered are relatively very low. However, in the case of investors willing to take risks for high potential returns, stocks and mutual funds are where the money is.

North Loop offers Fixed Deposits for low riders, handpicked mutual funds for the risk-takers, and an avenue to invest in the US Stock market. Sign up here to know more about our investment avenues.

Save money with

No-fee banking, investments, remittances & insurance for the global Indian

This publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended be advice. You must obtain professional advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax, investment or other professional advice from North Loop or its affiliates. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date. All opinions expressed do not reflect the views of North Loop nor are endorsed by North Loop.