People are often confused about where to invest. If you’re looking for a place where your money is safe and you’ll receive good returns, this article is for you. When it comes to investing, the stock market and fixed deposits are the first things that come to mind. But due to a lack of proper advice or knowledge, people often make wrong decisions. FDs are often the first thing that comes to mind. Indeed, they are considered the safest way to save. Furthermore, most people consider the stock market to be risky. For now, if you want to know more about the stock market and fixed deposits before investing , this article will tell you which one you can invest in according to your budget and needs.
What is FD?
A fixed deposit (FD) is a financial instrument offered by banks and other financial institutions. You deposit a fixed amount of money for a fixed period of time and earn a fixed interest rate. The bank pays you interest either periodically during this period or the full amount upon maturity. FDs offer safe and guaranteed returns, making them popular among risk-averse investors. Interest rates on FDs are typically higher than savings accounts, but lower than the stock market.
What is Share Market?
The stock market is a place where shares of companies are bought and sold. When you buy shares of a company, you become a shareholder in that company. Investors buy stocks to profit from rising share prices or dividends from the company. Stock market prices fluctuate constantly, depending on company performance, the economy, and investor sentiment.
Fixed Deposit vs Stock Market
1. Returns: The stock market can offer higher returns than fixed deposits. Fixed interest rates are fixed, while stocks can generate significant profits if the company performs well. However, there’s also the risk of losses if the stock price falls.
2. Risk: The stock market is highly volatile, making it risky. However, fixed deposits are a low-risk option as they offer guaranteed returns and principal protection.
3. Liquidity: In the stock market, you can buy or sell shares at any time, making it more liquid. In an FD, your money is locked in for a fixed period. If you withdraw your funds mid-term, the bank may impose a penalty.
4. Tax: Interest earned on fixed deposits is taxable, whereas long-term gains on shares are taxed at a lower rate.
5. Investment period: While stocks may offer better returns in the long run, FDs are a safer and more stable option for short or medium term goals.
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