As interest rates continue to fluctuate amid ongoing geopolitical complications, such as the Trump tariffs and the Russia-Ukraine war, along with domestic factors like declining inflation, investors in the country face a timely question: Should you park your money in traditional fixed deposits (FDs) or explore investments in bonds?
Here are the five key factors to weigh before making that decision:
1. Returns and yield potential
- Bank fixed deposits currently offer investors interest rates ranging from 5.5% to 9% broadly. The final applicable interest rate on an individual basis depends on various factors, including the applicant’s profile, total loan amount, current credit score, and past repayment history.
- In stark contrast, certain government bonds, such as the Reserve Bank of India’s floating-rate savings bonds, provide investors with yields of up to 8.05%. This number gets revised every six months.
- The corporate bonds, on the other hand, offer investors returns in the range of 9.5% to 10%, depending on various factors such as the issuing institution and tenure.
Note: The interest rates discussed above are illustrative in nature. For the latest interest rates on fixed deposits and savings bonds, please visit the official websites of the respective lending institutions.
The key takeaway here is that generally, bonds provide higher yields, but they come with a higher risk of capital loss or longer lock-in periods. That is why aspiring investors should consult certified financial advisors before investing in these asset classes.
In conclusion, if you prioritise stability, simplicity, and insured capital, FDs can be a compelling choice, especially in uncertain markets. On the other hand, if you are aiming for higher yields and are willing to take on more risk, bonds can offer increasingly attractive returns; any decision in this regard must be taken after consultation with a certified financial advisor.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Investment decisions should be made based on your individual financial situation and goals, preferably in consultation with a certified financial advisor. Past performance is not indicative of future results.
