Mutual Funds or FDs: Which Offers Higher Returns? Understand the Full Math with This Calculation..

Mutual Funds or FD: Nowadays, in India, people are exploring various avenues to earn money and grow their savings. While some are investing in mutual funds, others are generating handsome returns by parking their money in Post Office schemes. Ultimately, everyone shares the same objective: to maximize their earnings and secure a safe future. If you, too, are contemplating an investment, it would be beneficial to understand a few key points. It is crucial to determine which option—FD, Mutual Funds, or the Post Office—can yield the highest returns if you were to invest ₹1 lakh for a period of 10 years. Let us break down which option—Mutual Funds or FDs—offers superior returns.

How much return will you get from an FD?
According to SBI's official calculator, the bank is currently offering an interest rate of 6.5% on 10-year Fixed Deposits (FDs). This investment accrues compound interest on an annual basis. Calculations based on these figures reveal that if you invest ₹1 lakh in an FD for 10 years—assuming the interest rate remains constant at 6.5%—your money will grow to ₹1,87,714 after a decade. This implies that you would earn a total profit of ₹87,714 solely in the form of interest.

How much will you get from the Post Office?
If you choose to invest in the Post Office's Kisan Vikas Patra (KVP) scheme, you will once again benefit from annual compound interest. This scheme currently offers an interest rate of 7.5%. Any individual is eligible to invest in this scheme. Its maturity period is 9 years and 7 months—equivalent to 115 months. If you hold the investment for the entire duration, your money effectively doubles, meaning if you invest ₹1 lakh, you will receive ₹2 lakhs in return after 115 months.

How much return can you expect from Mutual Funds? If you invest ₹1 lakh in mutual funds for a period of 10 years, assuming an average annual return of 12%, your money could grow to approximately ₹3,10,585—meaning you could realize a profit of about ₹2,10,585. Returns in mutual funds are not fixed; they can fluctuate, moving both upward and downward.

Which option is best for you?
Mutual funds are the best option for you, as they yield the highest returns over the long term. However, if you prefer to avoid risk, the Post Office's KVP (Kisan Vikas Patra) would be a better choice, as it is secure and offers higher returns than a Fixed Deposit (FD). Nevertheless, it is worth noting that funds invested in KVP remain locked in for an extended period.

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