Fixed deposits are the safest investments on the market today. It seems like everyone has an FD to their name. And why not? There’s very little risk involved and the returns are guaranteed.
There’s a lot of confusion around investing in the stock market. A lot of economists recommend that you don’t invest in the stock market if you have the choice not to. But it’s a myth that most people won’t get their money’s worth from the stock market. If you look at the market in polar opposites of either good or bad, you’re probably going to get a false picture.
So, what compares? What’s the superior investment option from the two and which works best for you? Here are a few pros and cons of both FD and stock market.
Fixed Deposits: is it as Good as it Seems?
What most people leave out when looking at FDs is the reinvestment risk. This is something that everyone who opens an FD faces. You can lock in your FD at a good rate of interest for a long tenure if you’re happy with the interest rate. However, using your tenure, if you want to reinvest your returns, you’ll be at a crossroads if the interest rate isn’t in your favor.
There’s also a very small sum of returns overall on an FD. The highest interest rate you can get with a bank or NBFC will be around 8-10%. That isn’t a good rate to beat inflation.The benefits of FD calculator is that it will help you to check how much returns you will earn after maturity.
Most Fixed Deposits are taxable. If you fall in the high-income bracket, you’ll be charged accordingly. The tax can be such that your real returns may be zero or at the most, negligible. Besides this, you’ll be charged for premature withdrawal. This is why Fixed Deposits are not considered as a liquidatable asset.
Stock Market: Is it for You?
The stock market has taken a lot of criticism in the past since it comes with a lot of risks. But that’s not the complete picture. It’s common knowledge that to make a profit in the stock market, you should buy low and sell high. And the alternate option is to trade and invest in different stocks.
However, investing in a company that you don’t understand or support isn’t a good idea. If you’re looking for a long term investment, then a day to day market fluctuations in stock value shouldn’t affect you.
Stocks and Fixed Deposits are some of the most popular investment options on the market for a reason. They promise great returns or a lot of security.
Keep all of this in mind, and you’ll find the right FD to go for, or the perfect stocks to invest in, or even both. Look at your financial goals and risk tolerance in accordance with your timing You’ll know what’s best for you.