Fixed Deposits vs Stocks - What Should NRIs Invest in?| North Loop Official Blog
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16 Oct 2020

Fixed Deposits vs Stocks - What Should NRIs Invest in?

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Over the last few years, India’s rapid growth and development, especially on the industrial front have prominently attracted many Foreign Direct Investments in India. Ever since more and more businesses and corporations have been popping up across various sectors, the securities markets have started flourishing in India. This economic resilience has resulted in a growing number of NRIs investing in the Indian markets.
But if you’re one of those NRIs confused about where to invest your surplus funds, this article unravels two major investment instruments, where you can invest your surplus cash.

Before making a decision to invest your money, we advise our readers to undertake proper prior market research as well as analyze your financial goals, risk appetite, investment tenure/period, and expected returns. Fixed Deposits and Stocks vary in terms of risk exposure and rate of returns, with FDs drawing the attention of laid-back investors in pursuit of low yet stable returns and stocks being an enticing investment option for more aggressive investors in pursuit of high yet unstable returns.

What are Fixed Deposits?

Fixed Deposits are non-market linked financial instruments offered by various banks and NBFCs (Non-Banking Financial Companies) wherein investors earn an interest rate on the amount deposited (generally higher than interest accrued on savings accounts). Under fixed deposits, investors are required to deposit a lump sum amount into the FD account and a lock-in period needs to be decided upon (as per the investor’s preference). Based on the amount of money deposited and the tenure of the lock-in period, the deposit accrues interest periodically or at one shot upon term maturity.

Since Fixed Deposits are immune to inflation and market fluctuations, the risk exposure as well as the rate of returns are significantly lesser compared to market-linked investment instruments. Fixed Deposits offer good returns over the long run and are considered as one of the safest modes of investment.

In India, NRIs can invest in Fixed Deposits through 3 different types of accounts- NRE Account (Non-Resident External), NRO Account (Non-Resident Ordinary), and FCNR (Foreign Currency Non-Resident) Account:

NRE Accounts are a type of bank account wherein NRIs can deposit money (in INR) in the account in exchange for an interest rate. This is mainly used by NRIs transferring foreign income to an Indian Bank Account. This account is not taxable in India.

NRO Account is a type of bank account opened by NRIs to accumulate any income received within India. This account is taxable in India.

FCNR Account is a type of account opened by NRIs to accumulate funds in a foreign currency, hedging any exchange rate fluctuation risks.

Get a zero-balance, no-fee NRE/NRO account with North Loop in 5 minutes

What are Stocks?

Stocks are market-linked investment instruments, wherein each unit represents a fraction of ownership of a company. The percentage of ownership is directly proportional to the number of shares owned by an investor, relative to the outstanding shares. Companies list stocks on the stock exchange which can be purchased by potential shareholders, offering an avenue for the company to raise money to conduct their operations or even expand and offering investors a way to earn returns.
The rate of return earned by shareholders depends on the financials and performance of the company as well as the market conditions.

Stocks are considered to be a riskier investment instrument than Fixed Deposits as they are exposed to the volatility of the market, thus offering unstable returns. However, since stocks are market-linked, there is a strong possibility of shareholders earning high returns in case the market performs well.

In India, an NRI is required to have either an NRE or NRO account, a trading account approved by SEBI, and a Demat Account. NRIs can directly invest in the Portfolio Investment Scheme (PINS) of the RBI but cannot carry out intraday trading and short selling of shares.

Fixed Deposits or Stocks?

FIxed Deposits vs Stocks
ParticularsFixed DepositsStocks
Risk ExposureLowHigh
Stability of returnsHighLow
Rate of ReturnDepends on the duration of FD and Amount deposited, however, comparitively lower.Depends on the type of stock, however, offers comparitively higher rate of return.
LiquidityPremature Withdrawals attract a penaltyVery High
Additional ExpensesNo other additional expensesAdditonal expenses as per discretion of the stock broker.
Impact of inflation and market volatilityLowHigh


Investors looking to invest in a more laid-back mode arguably have no better option than Fixed Deposits, as your interest keeps getting accrued- recession or not. Stable returns bundled with the security a bank account provides is almost everything a risk-averse investor can look forward to. However, on the other hand, investors willing to risk it for the benefit of high returns, by investing in small-cap and mid-cap stocks have stocks as one of their best bets. You have investors going from rags to riches by investing in the stock market and vice versa as well (if you’re not careful enough and haven’t done proper research).

North Loop offers fixed deposits with industry-first interest rates of up to 7% P.A for NRIs, up to 80% Overdraft on your Fixed Deposit, NRE and NRO Fixed Deposits, and a 100% digital paperwork-less FD account.

North Loop also provides an avenue to invest in the US Stock market, with over 3000 options to choose from and an opportunity to invest in fractional shares starting from just $1.
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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.