NEWS & ADVICE : FIXED DEPOSITS
FMPs or FDs: Make an informed choice
By Neelima Shankar
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Capital Protection

Another point of difference between them is that bank fixed deposits provide capital protection of up to Rs. 1 lakh, whereas FMPs do not have any such security measure to protect the investor's funds.

Pre mature withdrawal of funds

An investor can withdraw funds from the fixed deposit by breaking the fixed deposit. In these cases, the investor has to bear the loss of interest income. Premature withdrawal of funds from FMPs is normally not allowed by the mutual fund companies.

Banks vs. Mutual Funds

Last but not the least, bank fixed deposits are deposits made with a bank and the investors money is usually parked in bank's debt instruments. On the other hand, fixed maturity plans are brought out and managed by mutual fund companies, who, typically park these funds in government based securities.

FMPs or FDs: Which one to opt for?

The classic choice between FMPs and FDs can be made easily by taking into account two underlining factors - the risk bearing capacity of the investor and his objective of making the investment. FMPs provide investors with a lucrative chance to earn extra returns but with a risk factor attached with it. On the other hand, FDs provide investors with guaranteed but lower returns.


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