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Should I Invest in FD? Where to Invest for Better Returns?

19 May 2022

FD is a popular way to save money in India. They are low-risk investments that offer tax benefits and a fixed rate of interest on your deposit. They are easy to open, safe, and secure, and they can be used to earn interest on your deposits.

However, they are not the only way to save money in India. There are several alternative investment options that you can consider if you want to invest your hard-earned money but don’t want to tie it up for long periods of time or if you want more flexibility with how your money is invested.

Advantages of Fixed Deposit Investments

Fixed Deposits (FDs) have a guaranteed return and offer higher interest rates than other options such as bank accounts. However, there are alternatives to FDs that you may want to consider before making a decision.

Here are the main advantages of fixed deposit investments:

  • Guaranteed returns: FDs have a fixed interest rate for the duration of your investment. The interest is calculated daily and deposited into your account monthly.
  • Easy access: FDs allow you to withdraw money at any time without penalty. You can also use them as collateral for loans and financial products like credit cards or home loans.
  • Liquidity: FDs are liquid assets that can be used immediately without any restrictions on withdrawal or transferability. You can transfer funds from one bank or financial institution to another without restrictions on how much money is available at any given time during an emergency situation or unexpected expense.

If you are looking for a secure, hassle-free investment and are willing to lock your money for a specific period of time, then bank fixed deposits are the best option. Fixed deposits offer high returns on investment (ROI) rates because they are backed by government bonds and other types of financial instruments which offer higher interest rates than traditional bank accounts or savings accounts. 

Disadvantages of Fixed Deposit Investments

There are some disadvantages of investing in Fixed Deposit in India that you should be aware of before making your decision

  • Fixed Deposit Investments are not as Liquid as Other Investments

One problem with fixed deposit investments is that they can be difficult to liquidate. When you invest in a bank fixed deposit, you agree to keep your money in the account for a certain amount of time. Often, this means that you cannot withdraw it until maturity. In addition, when you do withdraw your money early, there will be penalties involved which could eat into any interest that has been earned on the investment so far.

  • High-interest rates aren’t Always Guaranteed

Fixed deposit rates are not guaranteed, so there’s no guarantee that your interest rate will remain high for the duration of your investment. In fact, some banks have been known to lower their rates mid-term, which can be financially devastating if it happens at a time when inflation is high and you’ve already committed to a long-term plan.

  • No Tax Benefits

Bank FD have no tax benefits like those offered by other investments like mutual funds and stocks. These tax benefits can make a big difference for investors who qualify for them!

Alternatives to Fixed deposits in India

Fixed deposits are great for many people, but they’re not right for everyone. If you’re looking for an alternative to fixed deposits, here are some options:

  • Debt Mutual Funds

Debt mutual funds are mutual funds that invest in debt securities such as government bonds, corporate bonds, and commercial paper. This means that they’re not as risky as most stocks, but they also don’t have the potential for high returns that stocks do. Debt mutual funds generally have low fees, making them a good alternative to fixed deposits.

  • Liquid Funds

Liquid funds are another alternative to fixed deposits. They invest in short-term debt instruments like treasury bills and certificates of deposit (CDs). Liquid funds tend to have higher yields than money market funds because they invest in riskier assets with higher yields. However, since liquid funds invest in short-term debt instruments, they’re not suitable for those who need access to their money.

  • Equity Funds

Equity funds are the third type of alternative to fixed deposits. They invest in equity securities like stocks or real estate investment trusts (REITs). These investments tend to be much more volatile than debt securities or liquid assets, but they also have the potential for high returns over time.

  • Corporate Fixed Deposits

Corporate Fixed Deposits (CFD) are long-term investment plans offered by large companies like banks, insurance companies, and NBFCs (non-banking financial companies). Corporate FDs offer higher fixed deposit interest rates than regular FD but come with more restrictions on withdrawal options and lock-in periods than standard bank FD. They can be better for those looking for higher returns than regular FD without having to worry about liquidity issues like debt mutual funds have because there is no lock-in period or restriction on withdrawals in case of emergencies like sickness or death among family members, etc.

  • Fixed Maturity Plans

Fixed maturity plans, also known as FMPs, are mutual funds that trade like stocks but require a three-year commitment from investors. They’re designed for long-term investing. FMPs are similar to corporate fixed deposits in that they offer high returns on investment; however, these tend not to have any kind of liquidity option either—they’re locked into an investment period for a long.

  • Government Bonds

Government bonds are a great option for people who are looking for a safe investment with a fixed return. The government issues these bonds at an interest rate that is higher than what fixed deposits offer. Investors can choose between short-term or long-term bonds depending on their investment goals and needs. The maturity period of these bonds ranges from one to twenty years, with the longer terms offering higher returns.

Other Better Investments Than Fixed Deposits

Fixed deposit investments are a great way to earn interest on your money, but there are other ways you can invest with better returns and lower risk. Let’s take a look at some other options for investing your money in India:

  • Stock Market

The stock market is an excellent way to make money, but it requires a lot of work and research. If you’re willing to put in the time and effort, it can be very profitable. It is one of the most popular ways for people to invest their money in India. The stocks of different companies are traded on the stock market and this provides many investors with a great deal of opportunity for growth.

  • Mutual Funds

Mutual funds are another option for those who want to diversify their portfolio of investments with lower risk than stocks or bonds offer. Mutual funds allow investors to pool their money together to afford to buy more shares of companies’ stocks without having to spend as much individually each time they wanted something new added to their investment account(s). This allows them to get better returns than they would have received by investing individually.

  • Real Estate

Real estate is another good investment option in India that provides investors with higher returns than fixed deposits do. Real estate prices tend to increase over time so if you buy property now at today’s low price then you may be able to sell it later at a much higher price once those prices start increasing again later. 

  • IPO

IPOs offer investors access to high potential start-ups which are going public for the first time. These companies are usually at an early stage of development when they go public and this means that there is no track record of profitability or even revenues generated by them yet. However, the growth potential is huge as the company uses IPO funds to expand its operations and reach out to more customers.

In addition, IPOs offer investors an opportunity to buy shares at lower prices than the market price once the company starts trading on exchanges after listing itself there officially. This means that investors can get into high-growth companies at a lower cost which will enable them to earn higher returns over time as these firms grow rapidly.


Financial planning for the future is a very important part of any individual’s life. It is important to plan for the future and make sure that you have enough money saved up so that you can live comfortably in the future. There are many different ways to invest your money for better returns as mentioned above, but if you want to make sure that your investment will be safe, then you should consider investing in fixed deposits. 

Fixed deposits offer an attractive rate of interest and are insured by the government. Moreover, they are a great way to boost your savings and earn tax-free income. 

FDs are an excellent way to build up your savings while earning some interest on your money. The rates are very low right now, but they’re still much better than nothing. You should consider investing in Fixed Deposits if you’re looking for a secure place for your money until you need it later down the road.


The stocks mentioned in this article are not recommendations. Please conduct your own research and due diligence before investing. Investment in securities market are subject to market risks, read all the related documents carefully before investing. Please read the Risk Disclosure documents carefully before investing in Equity Shares, Derivatives, Mutual fund, and/or other instruments traded on the Stock Exchanges. As investments are subject to market risks and price fluctuation risk, there is no assurance or guarantee that the investment objectives shall be achieved. NBT do not guarantee any assured returns on any investments. Past performance of securities/instruments is not indicative of their future performance.
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