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Both bank fixed deposits and debt funds are debt instruments but people prefer to invest more in FDs than debt mutual funds. So, where do you get more returns? After all, the idea is to get rich and that too fast! Should you choose an FD or a debt fund? What risk is involved in both the instruments? Well, in the Zee Business show 'Money Guru', there is a detailed analysis of returns and risk involved in both the instruments. The detailed comparison tells you which one is better for short, long or medium-term goals. Hemant Rustagi, CEO of the Wiseinvest advisors has shared important information with Zee Business that lets you understand both the instruments in detail.

 
What is a Fixed Deposit (FD)

- Fixed Deposit is the first choice for safe investments
-  An FD can be open for a period of 7 days to 10 years
- Investors can open FD in bank and post offices
- Investors also have an option to open a corporate FD
- The lump-sum amount can be kept for the stipulated period
- Interest on the deposit is fixed

Disadvantages of  FD

- Returns on fixed deposits are very low
- Interest rates on FDs get cut on a periodic basis
- Post-tax returns are not very good
- FDs are poor in beating inflation

What is Debt Fund

- Debt Mutual Funds are a kind of debt investment instrument
- Bonds, debentures, government securities are debt instruments available
- Deposit Certificate, Commercial Paper also the kind of debt instruments
- Different debt funds are there for different financial goals

How to choose a debt fund?

- Always choose debt funds according to your financial goals
- It provides an option for dividend payout, dividend resettlement, etc
- Vigilance must be exercised when opting for a dating investment
- Post-tax returns will be as if you had chosen the investment option

Tax Liability

- Tax liability according to the investment period
- STCG tax will be charged if profits are redeemed before 3 years
- The tax liability will be as per the tax slab
- LTCG tax will be charged if profits are redeemed after 3 years
- 20% tax indexation benefit is also given

Here is a list of funds recommended by Rustagi:

1. Liquid Funds

- Axis Liquid Fund
- Nippon India Liquid Fund
- Aditya Birla Sun Life Liquid Fund

2. Ultra Short Duration Funds

- Kotak Savings Fund
- SBI Magnum Ultra Short Duration Fund
- ICICI Prudential Ultra Short Term Fund

3. Low Duration Funds

- Kotak Low Duration Fund
- SBI Magnum Low Duration Fund
- Invesco India Treasury Advantage Fund

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4. Short Duration Funds

- IDFC All Seasons Bond Fund
- Kotak Short Term Bond
- Axis Short Term Fund

5. Medium Duration Funds

- SBI Magnum Medium Duration Fund
- IDFC Bond Fund Medium Term Plan
- HDFC Medium Term Debt Fund