Fixed Deposit v/s Mutual Fund Returns Using a Calculator

Fixed Deposit v/s. Mutual Funds

Both fixed deposits and mutual funds are hot favorites among investors. When considered over a specific investment span, both these instruments offer satisfactory returns. However, before making up your mind, it is best to undergo a comparative study about both these popular financial investment tools to get a clear picture:

RETURNS Market-linked returns and entirely dependent on the current performance of the stock market Offer guaranteed, fixed returns over a stipulated period at a predetermined rate
RISK Differs from one fund to another and is generally influenced by the market Involves zero risk as everything is predetermined
EXPENSES Carry some expenses and charges that get deducted on account of fund management No expenses
WITHDRAWAL Funds can be withdrawn without any cost after a stipulated time. However, a 1% charge is levied if withdrawn before that The premature withdrawal comes with a penalty
TAXATION STCG is charged @ a flat 15%, and LTCG is charged 10% of the total earnings above INR 1 lakh. In the case of debt funds, 20% post-indexation LTCG is charged Earnings are subjected to 10% TDS on interest earned over INR 10000 over a single financial year


Mutual Fund returns

The mutual fund returns are dependent on the type and nature of the chosen fund and the total period of investment. Any equity-based mutual fund of any standard large-cap company possesses the potential to bring around a return of 15%-20% when spanned for a period of 3-5 years.

Fixed Deposit returns

Fixed deposits are grossly different from mutual funds. Mutual funds offer returns on the amount invested, while fixed deposit schemes offer returns on the amount deposited. FD returns are fixed and predetermined as it maintains a standard interest rate. This interest rate is declared by the RBI and gets revised from time to time and also varied from one bank to another. 

Advantages of mutual fund investments

Some of the major benefits of mutual fund investments include

  1. The risk gets migrated through enough diversification of the concerned investment
  2. The minimum investment limit stands at INR 500 or even INR 100
  3. Offers potentially high returns
  4. Professional financial experts manage the funds on the behalf of the investor
  5. Easy allocation of the surplus amount is possible using top-ups
  6. Exists several investment modes like SIP, lump sum, Systematic Transfer Plan, etc.

What is a mutual fund calculator?

A mutual fund calculator is a digital tool for easy calculation of mutual fund investment returns. Even before the actual investment, you can get a clear idea of your estimated returns over a specific period by using this handy tool, once you enter the relevant details. It allows better financial management and offers a clear picture of your financial position in respect of market performance as the planned investment is liable to span several market cycles. 

The working strategy of a mutual fund calculator

A mutual fund calculator works using a specific formula. For lump sum investments, the formula is 

Future value= Present value(1+r/100)^n, where r= estimated return rate and n= investment tenure.

In the case of SIP investment, the formula is:

FV= P[(1+i)^n-1]*(1+i)/I, where, FV= future value or the maturity amount; P= the specific amount invested through SIP; i= compounded return rate; n= total number of investment months; r= expected return rate.

Advantages of Fixed Deposit investments

Some of the highlighting advantages of fixed deposit investments include:

  1. A government-backed scheme, with zero risk involvement
  2. Offers guaranteed fixed rate of returns
  3. Interest earned up to INR 50000 through FD by senior citizens allows a tax benefit u/s 80 TTB of the IT Act. 
  4. As per Section 80C of the IT Act, tax deductions of up to INR 150000 are allowed on FD deposits of over 5 years
  5. Interest pay out options can be chosen by the depositor, which can be monthly, quarterly, or yearly
  6. One can avail loan against FD collateral of up to 80-90%

What is an FD calculator?

Similar to MF calculators, an FD calculator is also a handy digital tool, revealing your maturity amount once you invest in a particular FD scheme. As you enter the relevant details, including the deposit amount, the rate of interest, and the tenure of investment, along with the frequency of interest pay out, you will instantly receive the specific answer without any hassle, aiding human errors. It is highly time-saving, helping in better comparison among different plans and making a sound financial approach. 

Working strategy of an FD calculator

In case of simple interest, an FD calculator follows this formula:

SI: P x R x T/100 where, P=principal amount; R= Interest rate, and T= time/tenure of investment.

In case of compound interest, the formula is:

A=P(1+r/n)^(n*t), where, A= maturity amount; P=principal amount; r= interest rate in decimals; n= total number of compounding in one year; t= total number of years.


The above discussion clearly highlights the importance of an FD calculator and mutual fund calculator in your journey of investment. Critical utilization of these tools ensures better and expert financial portfolio management. 

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