Fixed deposits are a good way to make a saving without losing your money but rather gain some through a good rate of interest which will be earned while investing in the bank for a specific period of time. Though FD is a benefit, it also has many drawbacks attached to it like less access, tax imposed, pre-mature withdrawal is not possible etc. if you are thinking of an alternative to fixed deposits then read on.
Debt Mutual Fund or Bond Fund
Debt Mutual Fund is a mutual fund investment in bonds and securities rather than equities or shares. Unlike shares where prices can go up or down and your investment can create a loss, bonds will give only positive returns where your money is safe, risk-free but the interest rate will fluctuate based on market conditions. They are also tax free and can be traded to other buyer at any point of time offering higher returns after tax deduction upon maturity. For this reason bonds are a good alternative to fixed deposits.
Fixed Maturity Plan (FMP)
FMP’s are similar to Debt mutual fund where investment is in bonds and securities; they offer higher returns for a minimum period of one month and maximum period of three years. They are close ended funds as the money invested cannot be withdrawn without reaching maturity and the exact returns is not known, can keep on changing upon the interest rate. They also incur a tax as per your tax slab. One of the many alternatives for fixed deposit.
Liquid Funds
Liquid funds offer a higher rate of interest compared to fixed deposit for a short period of time ranging from one day to three months maximum. There will be no additional tax liabilities and you can withdraw the money whenever you want, even the next day after depositing. There are two types of liquid fund; growth and dividend where money remains in the bank and the value of the fund goes up over time in the former, while in the latter the value of the fund is contained upto a price limit. Liquid funds are a good investment, if you want immediate cash in a shorter time and a good alternative to fixed deposit.
Corporate Fixed Deposits
Similar to fixed deposits in banks, several multinational companies like Godrej, Mahindra, Reliance, Tata etc also offers fixed deposits at a slightly higher rate of interest than what is offered at banks. The corporate companies have a flexible time period ranging from 6 months to 5 years and the interest is distributed monthly, quarterly, half- yearly or annually. They may not be as safe as bank deposits hence, a thorough check on the company and its financial position is vital.
Hence if you feel that fixed deposits is not worth your time and money, you know where to invest next; Corporate FD, liquid fund, FMP, bonds etc.
