How are you all? Investment today has become one of the essential elements of one’s life, just like we need food and water to survive, similarly, our financial goals need an investment plan to get accomplished.
Currently, there are several ways available in the market, to invest money and save for your financial goals, like Fixed Deposits, Post Office (Recurring Deposits), Mutual funds and many more. People often get confused between these multiple options of investment and get surrounded by many questions like what to choose, where to invest, which will be most suitable for their goal and many more.
Mutual fund Investment is the most recommended investment option, by the financial experts, due to many of its benefits, that we have already discussed in our previous blogs.
Today through our blog we are going to give you a comparative analysis, between the returns from different investment options, that will help you understand in a better way, why the mutual fund should be considered a good option to invest for your financial goals.
Returns from Recurring Deposits (Post Office)
Let us consider, a man started investing in a Recurring Account of Post Office on date 10th January 2020, where he started investing Rs 1000 per month for 5 years then the maturity date of his investment will be, 10th January 2025. Here I am giving a figure, depicting the calculated return of the man after 5 years.
The rate of return offered in post office is generally 7-8%, you can see in the figure, the total amount deposited by the man in five years of investment is Rs 60,000, and the amount that he will get at maturity is Rs 72,122.97, thus the return or benefit earned by the man will be, Rs 12,122.97.
Returns from Fixed Deposits
Let us consider a man deposited a lump sum amount of Rs 60,000 in a Fixed Deposit Account on 10th January 2020, for five years, his FD will mature on 10th January 2020. Here I am giving a figure depicting, the calculated return of the man after 5 years.
The interest rate offered in Fixed Deposits ranges between 3.5% per annum to 6.75% per annum, which is taxable. We can conclude from the figure that the maturity amount, the man receives after 5 years will be Rs 84,006, thus the return earned by the man will be, Rs 24,006.
Returns from Mutual Fund Investment (Systematic Investment Plan Returns)
Let us consider a man who started an SIP of Rs 1000 per month, in a specific mutual fund scheme, for five years. Here I am giving a figure depicting the calculated SIP returns of the man after 5 years.
The rate of return offered by mutual funds varies from 10-12%, and the significance is that, if the market outperformed, the rate of return can go up to 15% or more. We can conclude from the figure, the total amount invested by the man in five years will be Rs 60,000 and the amount received by the man after 5 years will be Rs 82,486, thus the return earned by the man in five years will be Rs 22,486.
If we conclude from the above comparison, we can clearly see that the Mutual fund Investment yields good returns compared to Recurring Deposits in Post Office. Although we can see that Fixed Deposits, yield good returns from mutual funds, still mutual fund is more preferred by Financial advisor because:
- Mutual Fund offers good liquidity over investment than Fixed Deposits.
- The mutual funds also offer tax saving options on returns earned, whereas returns earned in Fixed Deposits are taxable.
- A mutual fund does offer the inflation-beating feature, whereas Fixed deposits do not.
As of now, you must have understood, why the mutual fund is considered a good investment option by many of the financial advisors, so don’t wait to plan your investment in mutual funds today and secure your financial goals.
Most importantly, always consult a financial planner or advisor, before starting your investments. They will help you select the best fund, for your investments as per your requirement.
You can also contact us at Shri Ashutosh Securities Pvt Ltd., we are here to help you in any way possible.
(Mutual Fund investments are subject to market risk Illustrations are for example only, there is no guarantee of returns. Past performance is not an indicator/guarantee to future returns).