FD vs bond fund vs direct investment: Which option will give you more? Experts explain
FD vs bond fund vs direct investment: Bank Fixed Deposits or FD is a kind of investment that suits those investors whose risk appetite is lowest.
FD vs bond fund vs direct investment: Bank Fixed Deposits or FD is a kind of investment that suits those investors whose risk appetite is lowest and you have a guaranteed return. Most importantly you can liquidate your fund at the time of monetary crisis without much inconvenience. However, according to the experts, for those who can afford some limited risk, bond funds or direct investment via STP (Systematic Transfer Plan) is a better option, depending upon the age and requirement of the investor.
Elaborating upon the difference between FD and direct investment vs STP, Kartik Jhaveri, Director — Wealth Management at Transcend Consultants said, "Fixed deposit or FD is for those who don't really want to create more money from their investments and they want their money safe only. Senior citizens are the best suited for such an investment category. Apart from Senior Citizens, you can put those people on the list whose children are well settled and they have enough investment and now they don't want to invest anymore. However, even for those who are going for FD, bond funds are the better option as they enhance the probability of return by around 1 to 1.5 per cent." He said that when the equity market is getting hit severely, such investments with a low-risk appetite should be used to create more money from investments.
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Jhaveri further added that for those who are young and need to create as much money from their limited funds as they can, direct investment via STP is better. It gives a return to the tune of 12-14 per cent. However, remember that this is in the long-term and depends upon market performance.
Terming FD a sign of healthy investment portfolio, Jitendra Solanki, a SEBI registered tax and investment expert said, "Robust your portfolio might be, it is always wise to safeguard a significant portion of your saving capital. Whether you are risk-averse or a risk-taker, fixed deposits are a form of investment that suits all and hence, ideally, one should have at least 20 percent of their investments in Fixed Deposits. It is one of the best hedging tools that balances your overall investment portfolio."
Elaborating upon the direct investment via STP Solanki said, "In STP, an investor decides a certain amount that will be transferred from the low yielding option to the high yielding option after a particular period. It helps those investors who don't have much time to monitor their portfolios. Generally, such options are better suited for the salaried class." But, to avail of this facility, the investor has to choose his or her investment tools for the STP as the money flow will take place only in those options chosen for the STP, said Solanki.
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