Should you invest in Stock Market or Fixed Deposits?
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Should you invest in Stock Market or Fixed Deposits?

  • Highlights

  • Choosing best option by balancing risk with yield

  • High returns with stock investments

  • Assured returns with fixed deposits

Like every investment instrument, the stock market and fixed deposits too have their pros and cons. You must focus on finding the right balance between high-yield, high-risk options and those that guarantee safety.

For immediate savings, investing in a fixed deposit can be a viable option. However, if you are investing for the long term, you should look at equity investments as well, as they offer higher returns.
Here’s a list of factors to help you decide which is the most profitable option for you:


Risk appetite

If you just started your career and have many working years ahead of you, you should consider investing in high-earning, high-risk investment options. But, balance this with a fixed deposit investment. This will help you save for a rainy day or for capital appreciation, which you can use as a down payment for an asset purchase in the future.

Tax benefits

A fixed deposit investment can help in reducing your taxable income. Annual interest earned will be taxed if it exceeds a Rs. 5,000, when you invest in an FD with an NBFC. Any income you earn as dividend distributed to stockholders, is tax-free and adds to your earnings.

Effects of inflation

The basis for any investment is that it should beat inflation, so you do not end up in losses over time. Investing in the stock market over 15–20 years will help you earn returns that achieve this goal. You can expect 11%–12% interest for such an investment. If you’re looking for high returns from a fixed deposit, you must pick an FD of shorter tenor to achieve similar results.

Need for liquidity

You can sell investments in equity and raise money quickly. But, you will lose some money depending on the price, on the day of sale. On the other hand, fixed deposits can be liquidated.
You can do so, by visiting the FD provider’s website. You will have to pay a premature withdrawal penalty, and may lose out on a portion of the interest.

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Assured returns

With fixed deposit investments, your principal and interest will be given to you at the end of tenor. But, with stock market investments, there is no guarantee for you to count on, as they are linked to market fluctuations.

As you can see, there is more to consider than simply making a profit. Armed with this information, you can plan your future investments and ensure financial security.

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