Fixed deposits (FDs) and bonds are both investment options that offer fixed income. However, they differ in their purpose, returns, and risk.
Fixed deposits
- A bank-based investment where you deposit money for a fixed period of time at a fixed interest rate
- FDs are known for being safe and predictable
- FDs are a good option for investors who want stability and guaranteed returns
FDs are insured up to ₹5 lakh - FDs are a good option for conservative investors and those with short to medium-term financial goals
Bonds
- A debt instrument issued by companies or governments to raise capital
- Bonds are market-linked debt instruments offering variable returns
- Bonds are a good option for investors who want higher returns and diversification
- Bond risk can vary significantly based on the issuer’s creditworthiness
- Bond prices can fluctuate based on interest rate changes
- Some bonds, especially tax-free bonds issued by government entities, offer tax advantages
- Both FDs and bonds are considered safe fixed-income investments, but they are not completely risk-free.