Is Fixed Deposit Better Than Unit Trusts

All of us at some point of in time think about securing our future, and for this, we go for saving our money in different deposits schemes in different banks. One of these schemes is a fixed deposit which is a great way to keep your money for future investments. You can go for a short time period or a longer one depending upon your current requirement. You can invest a lump sum amount and receive great benefits later on with your money.

But talking about long term investments people always want to receive a large amount of interest to run their household for a lifetime. The interest rates and amount are quite low in fixed deposits. Various banking and non-banking financial institutions provide different offers and benefits to their customers. Several NBFCs that are non-banking financial institutions are nowadays offering higher interest rates in for fixed deposit service which attracts customers and binds their customers. Generally, the tenure of fixed deposits ranges from one year to five years. Several banks and other financial institutions also offer the facility of shorter withdrawals which is again helpful in some way.

A unit trust is a company that takes money from various investors and then invests this amount. A set of companies are selected depending on their live share rate on stock exchange around the world and their position, and then the amount is invested in these companies. This company investment involves lower risks compared to others as there is involvement of market experts who analyze the risks and prevent it from happening. They are also responsible for taking care of the funds invested by appropriately monitoring them.

These companies do not have a fixed term. Under Unit Trusts, you can purchase and leave at the time you want. But it is generally advised to plan your investment for at least more than five years in unit trusts as in this there is a fluctuating and unstable market. Many financial institutions these days offer the services of UT, but the fixed deposit policies are more prevalent in our country compared to the UTs.

No matter how much we grow and the new policies we get, people still find fixed deposits as the safest and the most secure form of investment they can have. It may be because they offer a steady income with guaranteed returns which is not true in the case of unit trusts. In UT the funds are not entirely risk-free due to the fluctuating market that it has.

Unit Trusts and Fixed Deposits can be compared in several aspects:

Accessibility: There is a penalty amount charged on breaking the fixed deposit before the completion of the tenure, so it is not recommended to withdraw amount prematurely.

Unit Trusts have the facility of accessing anytime without any penalty charges. They give full liquidity to customers.

Returns: Fixed deposits give a guaranteed return that varies from??% to 9%, but one should ensure that it is simple and not compound. Fixed deposit is a policy that helps you meet your future needs.

The returns in Unit Trusts are related to funds and assets allocated by you, and also it depends on the market conditions.

Security: The degree of capital is quite high under fixed deposits. Hence the funds are safe and secure in an FD as it does not depend on market conditions. Unit Trusts, on the other hand, does not protect your funds.

Fees: One of the requirements in FD is to have a minimum balance; otherwise a penalty will be charged.

The fees involved in Unit Trusts are based on Administration, Adviser, and Management.

You must choose carefully as to which investment mode you have to use. A lot depends on the decision you make today as it affects your future. Each of the modes has its advantages and disadvantages based on the proper analysis you should go for the one which is the most suitable for you.