NEWS & ADVICE : FIXED DEPOSITS
FDs or Equity? Which suits you best?
By Neelima Shankar
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Making the right investment choice from the huge lot of options available often becomes a brain teasing task for the common man. For the conservative investor and perhaps most of the working class, fixed deposits have always been the preferred investment option. The major reason behind this is to hedge their money from potential risks in the market and keep it safe in a fixed duration deposit with a bank or a financial institution.

However, the other range of avenues available like stock markets, mutual funds, equity linked savings schemes, etc along with lucrative returns often tend to take the investor for a troll.

With the rupee sliding to its all time low against the US dollar off late, stock markets are witnessing a downward trend. With FIIs withdrawing Indian equities worth as much as over $292 million from the Indian market, share prices have seen as much as 9% dip in recent times.

Also, following the European Crisis, stock markets all over the world have crashed over the period of last one year. During the last one year Bombay Stock Exchange (BSE) Sensex has fallen by 10.45%, Nifty shrunk by around 9.76%. Mutual funds investing in large cap companies have lost by around 5 to 8%.

Tentative returns on investment in FDs and equity/MF

A comparative analysis of returns from fixed deposits and equity/mutual funds would help in better understanding of the possible returns achievable from these sources.

Let us consider a fixed deposit with a bank, around 5 years back when the interest rate lied somewhere near 8.5 on deposits for 3 to 10 years. Let us assume we had Rs. 100,000 and we deposited the same in the bank FD for 5 years. Returns that would come would be Rs.52, 686 in interest and Rs. 152,686 in hand.


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