FD vs bond fund vs direct investment: Here is what suits investors, say experts

Fixed Deposit or FD is a kind of investment where your risk appetite is low and you have a guaranteed return. Most importantly you can liquidate your fund at the time of crisis. However, for those who can afford some limited risk then bond funds or direct investment via STP (Systematic Transfer Plan) is a better option, depending upon the age and requirement of the investor.

Elaborating upon the difference between FD and direct investment via STP Kartik Jhaveri, Director — Wealth Management at Transcent Consultants told Zee Business Online, "Fixed deposit or FD is for those who need not create money from the money and they want their money safe only. Senior citizens are the best suited for such investor category. apart from this, you can put those people in the list whose children are well settled and they have enough investment and now they don't want to invest anymore. However, even for those who are going for FD, bond funds are the better option as they enhance the probability of return by around 1 to 1.5 per cent."

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Jhaveri further added that for those who are young and need to create as much money from their limited funds as they can, direct investment via STP is better. It gives return to the tune of 12-14 per cent in long-term, depending upon the market performance. However, he said that it is a requirement that fuels which one is better but FD for the new generation is not advisable as their requirements are expected to rise as the time passes.

Terming FD a sign of healthy investment portfolio Sachin Sikka, Business Head, Retail & Corporate Liabilities, Bajaj Finance Limited said, "Robust our portfolio might be, it is always wise to safeguard a significant portion of your saving capital. Whether you are risk-averse or a risk taker, fixed deposits are a form of investment that suits all and hence, ideally, one should have at least 20 percent of their investments in Fixed Deposits. It is one of the best hedging tools that balances your overall investment portfolio."