It is important to invest in savings instruments that suit your needs. We leave you all the information so that you can make the best decision.
Term deposits versus mutual funds, it seems almost like a confrontation, but the truth is that it is good to know their differences and definitions in order to choose the one that best fits your investor profile and your financial needs when investing.
What are mutual funds?
The mutual funds are an alternative investment diversified because you can access a variety of financial instruments through them. There are different alternatives that fit different profiles of investors.
Advantages of mutual funds
In order for you to make a good decision about where to invest your money, whether in mutual funds or term deposit, we will tell you about some of the advantages of mutual funds.
Different alternatives: access to more than 27 funds that you can combine according to your risk tolerance level, investment horizon, etc.
Diversification: you can build your portfolio by combining the different funds to reduce the risk of your investments.
Flexibility and liquidity: you can redeem your savings partially or totally, as many times as you want and easily and quickly.
Profitability: funds have different levels of risk depending on the asset or market in which they invest.
Tax benefits: by investing in different Types of Mutual Fund Schemes you can obtain the tax benefits.
Team of professionals: one of the main advantages of choosing to invest in a mutual fund is that a portfolio manager with extensive experience in the field manages your investments.
That is, it performs monitoring operations, exhaustive analysis and selects the best investments to meet the fund’s objectives and make your savings profitable.
How much do you earn in mutual funds?
Determining whether to invest in mutual funds and how much profit you could make depends on the type of mutual fund you choose.
For example, short, medium or long term, and also the type of investor profile you are, since depending on the risk you are willing to assume, one type of mutual fund or another will be recommended.
You can always review historically how much the mutual funds you are interested in investing have grown.
What is a term deposit?
It is the sum of money that is invested in a financial institution in order to take advantage of the interest that is generated in a certain period of time. When this term is over, the bank returns the invested amount plus the interest on this term deposit.
One of the advantages of this type of financial instrument is that the profitability for this deposit is fixed, safe and known at the time of making the decision to invest. However, in general, the earnings are usually low.
Term deposit risks
Term deposits are subject to reinvestment risk. This occurs when the investment horizon of your project is longer than the maturity of the term deposit, so there is no certainty about what will be the rate at which the capital will be reinvested when the instrument must be renewed.
In contrast, investment in mutual funds India do not expire, they do not have to be renewed, so this risk is avoided.