What is Better than Fixed Deposit?

It is a common query among people. Everyone has now started asking what is better than fixed deposit? While Fixed Deposits (FDs) are a popular and safe investment option in India, there are alternatives that can potentially offer better returns depending on your risk appetite and investment goals. 

What is Better Option than FD?

Here are some investment options that might be considered better than Fixed Deposits:

Mutual Funds

• Equity Mutual Funds: These funds invest in stocks and have the potential for higher returns compared to FDs. They are suitable for long-term investors with a moderate to high-risk appetite.

• Debt Mutual Funds: These funds invest in bonds, government securities, and other debt instruments. They offer slightly higher returns than FDs, with relatively lower risk, making them a good option for conservative investors.

• Hybrid Mutual Funds: These funds invest in a mix of equity and debt instruments, providing a balance between risk and return. They are suitable for investors looking for moderate risk and better returns than FDs.

Public Provident Fund (PPF)

PPF offers tax-free returns with a 15-year lock-in period. The interest rate, though variable, is generally higher than FDs and the investment is backed by the government, making it a safe option.

Contributions to PPF qualify for tax deductions under Section 80C of the Income Tax Act, and the interest earned is also tax-free.

National Pension System (NPS)

NPS is a government-backed retirement savings scheme that provides market-linked returns, generally higher than FDs. It offers tax benefits under Section 80C and an additional deduction under Section 80CCD(1B).

NPS allows you to choose the mix of equity and debt, offering the potential for better returns with long-term investment.

Some other options to consider other than the fixed deposit are:

• Corporate Fixed Deposits

• Real Estate

• Stocks 

While Fixed Deposits offer safety and assured returns, alternatives like mutual funds, PPF, NPS, corporate FDs, real estate, and stocks can offer better returns. 

However, these options come with varying degrees of risk and should be chosen based on your financial goals, risk tolerance, and investment horizon. Diversifying your investments across these options can provide a balanced approach to achieving higher returns.

This is all about what is better than fixed deposit.

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As an investor, I can tell you what is better than fixed deposit (FD). The majority of Indians frequently talk about FDs when referring to "safe" investments. The reason is quite simple it offers the highest security. FD returns, however, don't always surpass inflation. There comes different alternatives to FD like real estate investment, mutual fund, Public Provident Fund (PPF) and so on. 

Top 3 Investment Options Better Than FD

To improve returns on your investments, it becomes important to reconsider the strategy you use. Let’s check out what is better option than FD:

Real Estate Investment

The most beneficial investment alternative that can give higher returns than a fixed deposit is real estate. Those who invest in real estate have the opportunity to earn both prospective capital growth and rental income over time. 

As real estate values typically increase over time, investing in it can also act as a form of protection against inflation.

Mutual Fund

Investing in mutual funds is an additional option to fixed deposit. Mutual funds invest in a diverse portfolio of stocks, bonds, and other securities by pooling the capital of several individuals. 

In the last ten years, the AUM of the Indian mutual fund sector has increased five times. Over time, it may yield higher returns than FDs.

PPF

For investors who are fearful of risk, PPF offers a government-backed long-term investment option with quarterly fixed interest rates set by the Finance Ministry. 

It is the best possible option because of the following facilities:

• Tax savings, 

• Flexible investment frequency, and 

• Partial withdrawal from the seventh financial year.

Apart from these 3, the following are better than FD options:

• Corporate Bonds 

• Recurring Deposit

• Securitised Debt Instruments (SDIs) 

• Post Office Time Deposit (POTD) 

• Fixed Maturity Plans (FMP)

• National Savings Certificate (NSC)

• Senior Citizens' Saving Scheme (SCSS)

I hope this answer helps you get an idea of what is better than fixed deposit.