Bank FD vs Government Bond: What is the difference between Bank FD or Government Bond, which is better in terms of return and risk..

Bank FD is the most popular investment option among people in the country. Because it has both fixed returns and capital protection. But, apart from fixed deposits, government bonds are also a better option for investment. Both bank fixed deposits (FDs) and government bonds are low-risk investment options, but there is a difference between the two in terms of returns, liquidity, and risk profile.

FDs generally offer guaranteed and fixed returns with low yields. On the other hand, government bonds, despite being low risk, can potentially offer higher returns than FDs. Let us tell you about the returns, risks, and other benefits of investing in bank FDs and government bonds...

Benefits of Bank FDs
Fixed deposits are offered by banks and non-banking financial companies (NBFCs). FDs offer returns based on a fixed interest rate for a fixed period, and there is no change in it.

-FD gives guaranteed returns on your investment.

-Bank FD is available with different tenures ranging from 7 days to 10 years. In such a situation, you can invest as per your wish keeping in mind your financial goals.

-Another special feature of Bank FD is that you can choose the option of monthly, quarterly, or annual interest payment, which gives you a stable income.

Benefits of Government Bonds
Government bonds, also known as government securities. These bonds are issued by the central and state governments to raise funds for development related projects and goals. In simple words, the government borrows money from the common people through bonds for the construction of various projects. Investing in government bonds means lending money to the government at a predetermined interest rate for a fixed period. Investment in government bonds can be done through RBI's platform RBI Retail Direct.

-Government bonds are backed by the government and are therefore considered a safe investment option.

-The probability of default on payment of government bonds is very low.

-Government bonds also offer regular interest payments.

Where are the higher returns and risks?

Bank fixed deposits offer guaranteed returns. On the other hand, government bonds can potentially offer higher returns than bank FDs, especially bonds with longer maturity periods. Apart from this, the returns on government bonds also depend on who is issuing the bond.

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