Mutual Fund vs NSC: Which can offer higher returns on Rs 9,00,000 investment in 5 years?
Compare National Savings Certificates (NSC) and lump sum Mutual Funds to find out which offers higher returns on a Rs 9,00,000 investment in five years. Read
National Savings Certificates (NSC) are government-backed fixed-income investment options with guaranteed returns and tax benefits under Section 80C of the Income Tax Act. Offering a 7.7% annual compound interest rate. Mutual funds, on the other hand, pool money from investors to invest in stocks, bonds, and other securities. They provide diversification, professional management, and potentially higher returns, albeit with market-related risks. This article explores some of the key benefits of the two investment avenues. Here are some of the key points to remember while picking between the two, NSC and lump sum Mutual Fund.
(Disclaimer: This is not an investment advice. Do your own due diligence or consult an expert for financial planning)
National Savings Certificates (NSC)
Interest Rate and Maturity
- Interest Rate: 7.7% compounded annually (payable at maturity).
- Maturity Period: 5 years from the date of deposit.
Minimum and Maximum Investment
- Minimum: Rs 1,000 (in multiples of Rs 100).
- Maximum: No upper limit for investment.
Eligibility to Open an Account
- Single adult or joint accounts (up to 3 adults).
- Guardians for minors or persons of unsound mind.
- Minors above 10 years can open in their name.
Tax Benefits
Deposits qualify for deduction under Section 80C of the Income Tax Act.
Returns on Rs 9,00,000 Investment in 5 Years
- Principal: Rs 9,00,000.
- Maturity Amount: Rs 13,04,130.42.
- Interest Earned: Rs 4,04,130.42.
Mutual Funds
What Are Mutual Funds?
Mutual funds pool money from investors to invest in stocks, bonds, or other securities.
Investors own shares in the portfolio and share the generated income.
Benefits of Mutual Funds
- Professional Management: Experts handle research and investment decisions.
- Diversification: Spreads risk by investing in various companies and sectors.
- Affordability: Allows low minimum investments.
- Liquidity: Investors can redeem shares anytime for the NAV value.
Mutual Funds lump sum: Returns on Rs 9,00,000 Investment in 5 Years
- Principal: Rs 9,00,000.
- Estimated Returns: Rs 6,86,108.
- Total Value: Rs 15,86,108.
Returns Comparison
- NSC: Rs 4,04,130.42 (interest earned).
- Lump sum Mutual Funds: Rs 6,86,108 (estimated returns).
Lump sum Mutual funds vs NSC
- NSC offers guaranteed returns and tax benefits under Section 80C.
- Mutual funds provide potentially higher returns but come with market risks.