Alternative to a Fixed Deposit

Over the last few years, a fixed deposit is not spoken about too much because a lot of alternatives have emerged.

Alternative to a Fixed Deposit

Liquid Funds

The liquid fund invests in treasury bills and money market instruments. If the investment horizon is less than one year, a liquid fund may be chosen.

Arbitrage Funds

Arbitrage funds are hybrid mutual fund schemes with risk-free risk rate rates by exploiting price differences of the same underlying assets in different capital market segments. An arbitrage fund attracts equity taxation, which makes it a viable alternative to a fixed deposit for any period.

Debt Mutual Funds

Debt mutual funds is a scheme that invests in deposits and other money market instruments. If the investment horizon is more than one year, a short-term debt fund with high-quality underlying investments may be chosen.

Conservative hybrid funds

A conservative hybrid combines state and central government bonds with high dividend-paying equities. It generates a decent return if the investment is held for more than 3 years.

The order of the above-mentioned funds also indicates the expected return from low to high expected return. A liquid fund is the lowest followed by an arbitrage fund, debt, and then a conservative hybrid.

Index mutual fund/ETFs vs active mutual fund

Both funds fund and actively managed mutual funds allow investors to invest in n variety of assets.

Wealth creation: Index mutual fund vs active mutual fund?

Index Fund is a portfolio of stocks or bonds that are designed to mimic the performance of an index. It is a sort of investment that tracks a market index.

An Index fund is best for someone who doesn’t have lots of money and just starting to invest. This probably would allow them to achieve diversity in their investment without spending hours learning how to invest.

Index funds have lower fees as compared to mutual funds. It allows you to diversify across many companies and sectors.

An active mutual Fund is a fund that invests in a variety of assets, which includes stocks, bonds, and short-term debt. It is a professionally managed investment fund that pools money from different investors to purchase securities.

Mutual funds are just like index funds, invest in a variety of assets, stocks, bonds, etc but they are trying to beat the market. Since they employ a fund manager and research team, the cost is higher than an index fund.

Irrespective, index funds or actively managed mutual funds may be chosen by an investor. Usually, themes and large-cap index funds are more popular.

Direct vs regular mutual funds

A direct plan is what you buy directly from the mutual fund company, whereas a Regular plan is what you buy through as an advisor, broker, etc.

Direct or regular mutual funds, both grow your wealth

Direct Mutual Funds

Direct mutual funds are a type of mutual fund that is directly offered by the AMC or fund house. There is no involvement of third-party agents in the direct mutual fund. Therefore, since there are no third-party agents involved, there are no commissions and brokerage. Thus, the return is higher due to a lower expense ratio.

The NAV is higher than a regular mutual fund. The market research is done by you only.

Regular Mutual Funds

Regular plans are those mutual funds that are bought through an intermediary. These intermediaries can be brokers, advisors, banks, s, etc. These intermediaries charge the fund house a certain fee for selling their mutual funds.

The expense ratio for regular mutual funds is higher as compared to direct mutual funds.

There is the involvement of a third party in a regular mutual fund. NAV is lower than direct mutual funds.

Regular mutual funds are best suited for investors who seek assistance. Even though regular plans seem costly when it is compared to direct mutual funds. A small percentage of the additional cost is worth enough for the right investment decision.