Partner Content
oi-Oneindia Staff
Investors
frequently
face
this
question,
regardless
of
where
they
are
in
their
investment
journey.
The
right
answer
to
this
question
fuels
the
investment
industry’s
quest
for
innovation.
Today,
there
are
several
choices
available
in
the
market,
catering
to
every
investor’s
risk
appetite,
investment
goals,
liquidity
needs
and
other
investment
needs.
There
is
no
one-size-fits-all
approach
to
answer
the
above
question,
but
it
is
important
to
understand
which
financial
instrument
works
best
for
you.
Fixed
deposits
and
market-linked
instruments
are
some
of
the
most
common
investment
options.
An
FD
is
a
simple
and
stable
fixed
income
instrument
that
lets
you
grow
your
initial
investment
amount
for
a
fixed
period
of
time
at
an
agreed
upon
interest
rate.
Interest
rates
are
unaffected
by
market
conditions
and
so,
both
your
principal
and
interest
amount
are
guaranteed.
Market-linked
investments,
on
the
other
hand,
are
highly
volatile
financial
instruments
that
fluctuate
based
on
market
conditions.
The
returns
on
these
types
of
instruments
are
generally
higher
when
held
for
long
periods
but
not
guaranteed.
What
are
Fixed
Deposits?
The
assurance
of
consistent
returns,
stability,
and
the
convenience
of
regular
payouts
make
fixed
deposits
a
preferred
investment
instrument
in
India
and
are
issued
by
banks,
post
offices
and
NBFCs.
By
investing
in
a
fixed
deposit
(FD),
you
can
grow
your
savings
over
a
fixed
period
of
time
at
a
fixed
interest
rate.
With
no
effect
of
market
fluctuations,
FD
is
one
of
the
safest
investment
options
that
offers
assured
returns.
Fixed
deposits
are
also
ideal
investment
options
if
you
have
short-term
financial
goals,
you
can
protect
your
capital
while
also
generating
stable
returns
on
your
principal
amount.
You
can
also
choose
your
preferred
payout
frequency
depending
on
your
financial
requirements.
Moreover,
you
can
also
get
loans
against
your
fixed
deposits,
to
cater
to
any
financial
emergencies.
With
the
markets
showing
high
levels
of
volatility,
the
need
to
diversify
investment
risks
becomes
more
important
than
ever.
At
a
time
like
this,
fixed
deposits
become
attractive
modes
of
investment
whether
you’re
looking
to
park
your
funds
safely
or
looking
to
gain
assured
returns.
What
are
Market-linked
Instruments?
Market-linked
instruments
are
investment
options
that
are
linked
to
the
market,
and
hence
carry
a
higher
degree
of
risk.
These
investment
options
include
NPS
(National
Pension
System),
ULIP
(Unit
Linked
Insurance
Plan),
debt
securities,
indexes,
mutual
funds
and
equity
shares.
Although
these
types
of
investments
yield
better
returns,
it’s
important
to
note
that
they
are
highly
fluctuating
and
need
to
be
held
long-term
to
combat
volatility.
Given
that
these
types
of
investments
are
highly
risky,
one
must
exercise
due
diligence
to
avoid
taking
risks.
Market-linked
instruments
are
a
great
investment
option
if
your
risk-tolerance
is
fairly
high,
and
are
planning
on
staying
invested
in
the
market
for
a
long
time.
FD
vs
Market-linked
Instruments:
A
Comparison
Different
investors
have
different
risk-appetites,
financial
goals,
time
horizons
and
need
for
liquidity.
This
is
why
it’s
important
to
build
your
investment
portfolio
based
on
your
unique
needs
and
requirements.
Here’s
a
comparison
between
fixed
deposits
and
market-linked
instruments:
| Parameters |
Fixed Deposits |
Market-linked Instruments |
| Returns |
Relatively lower but fixed |
Higher but fluctuating |
| Liquidity |
Can be liquidated only after a stipulated time period |
Most market-linked instruments can be liquidated at any point |
|
Payout Frequency |
Get returns on a periodic basis or at maturity, as per your choice |
Payout frequency most often cannot be determined by investors |
| Convenience |
Very convenient, requires only a bank account |
Often requires additional accounts and verification |
|
Safety of Capital |
Safety of capital is guaranteed |
Safety of capital is not guaranteed |
|
Additional Interest Rate Benefits |
Senior citizens, especially retired people get attractive interest rates |
No such additional benefits |
|
Fees and Charges |
Very low to nil |
Carries a number of fees and charges like management fees, brokerage fees, commission, etc. |
| Tenor |
Determined by the investor |
No fixed tenor, but withdrawing before stipulated time period comes with an exit load up to 7% |
| Risk |
Very low risk |
Very high risk |
If
you’re
risk
averse
and
are
looking
to
protect
your
wealth,
you
might
be
better
off
investing
your
money
in
fixed
deposits
that
offer
stable
returns
and
enable
you
to
choose
your
tenor
and
payout
frequency.
However,
if
you’re
someone
that
has
a
high
tolerance
for
risk
and
doesn’t
have
immediate
need
for
your
investment
amount,
then
market-linked
funds
may
be
a
better
choice
for
you.