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Investment Options Better Than Fixed Deposits: Alternatives to FD

Are there investment options better than Fixed Deposits? This blog will answer this question and suggest a list of alternative investment options to FDs.
April 10, 2024

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Fixed Deposits are one of the most popular investment options in India but, they aren’t really the best. They are popular because as the name “Fixed Deposits” suggests they give you fixed returns on the amount you deposit.

The returns you get by investing in a fixed deposit vary from 4% to 8% depending on the time you invest the money for and your age. Senior citizens, for example, are generally offered a higher rate of interest. The time frame for these deposits can range for a few months to a few years.

What are fixed deposits?

A fixed deposit is generally defined as a financial instrument that is offered by banks or Non-Banking Financial Companies (NBFCs). Fixed deposits give investors a higher rate of interest than their regular savings bank account. The higher returns, however, come at the cost of the higher lock-in periods.

Why do people want alternatives to Fixed Deposits?

The reason people seek out alternatives to Fixed Deposits is that there are assets that give investors higher interest rates, lower lock-in or minimum holding periods and some assets even offer investors tax benefits under various sections of the income tax act.

Another reason people seek FDs as a form of investment is that they are considered safe and secure. These are low-risk, low-reward investments ideal for conservative investors.

What are the returns of investing in fixed deposits?

Returns for Fixed Deposits vary from bank to bank but are generally in the range of 4% to 8% depending on the lock-in period you select. Lock-in periods can be as low as 7 - 45 days for low returns FDs and as high as 2 years for high-interest Fixed Deposits.

Are Fixed deposits a good investment option?

Fixed deposits are not good investment options as far as returns are concerned because mutual funds, stocks, bonds and alternative investment assets like P2P Lending can give you much higher returns. However, if you look at them purely from the lens of safety they can seem like good options.

Since they are not directly linked to the markets, they are generally considered safer. So, unless you’re a really conservative investor who is completely risk-averse, fixed deposits will not excite you.

What are the alternatives to fixed deposits?

Liquid Mutual Funds are a good alternative to fixed deposits, they generally offer higher interest rates than the average fixed deposit and they also offer faster liquidity. What that means is that you can take your money out much faster in times of crisis without bearing any loss.

In case of fixed deposits, you would have to “break” the FD as we say in India and even bear losses. Other investment options can be Debt Funds, Digital Gold and Conservative Mutual Funds. The risk does rise with these but so does the reward.

Which investment option should one pick as an alternative to fixed deposits?

What you pick as an alternative to fixed deposits depends purely on you. You need to understand your risk appetite, investment goals and the time frame you are looking at.

If you’re looking for short term gains you might consider slightly high-risk assets like Consumer Loans that can give great returns.

If you’re looking for long term investments then equity mutual funds, international mutual funds and even stocks are options worth considering.

Investment Facts

Frequently Asked Questions on Alternative of FD

Q. Which is better, debt fund or fixed deposit?

Ans. A debt fund is better in terms of potential returns as it can earn you a lot more than a Fixed Deposit. However, if you’re seeking low returns and safety you will find liquid funds and fixed deposits more interesting.

Q. What is the best alternative to fixed deposits in India?

Ans. Liquid funds are a good alternative to fixed deposits. They offer higher interest rates and faster liquidity. It depends on whether you are looking for short term returns or long term gains.

Q. Which mutual fund is better than FD?

Ans. All debt funds, liquid funds & equity funds are better in terms of returns when compared to a fixed deposit. However, in terms of safety, Liquid funds are a good alternative to fixed deposits

Q. Is LIC better than FD?

Ans. A simple term-plan for life insurance is better than getting a fixed deposit if you are seeking tax benefits and life insurance.

However, an LIC is NOT an investment, it is a protection based asset that will safeguard your family in times of crisis. However, an LIC is not an investment as many assume.

Q. Is FD a good investment?

Ans. A fixed deposit is a low-risk, low-return investment option ideal for highly conservative and risk-averse investors.

If you are willing to take some degree of risk there are several better alternatives such as Liquid Mutual Funds, Debt Mutual Funds etc.


While Fixed Deposits (FDs) have long been a popular choice for risk-averse investors, the investment landscape offers a variety of alternatives that may offer better returns and greater flexibility. The alternatives to FDs discussed in this guide, such as mutual funds, bonds, and stocks, can provide the potential for higher yields and capital appreciation. However, these options also come with varying degrees of risk, and it's essential for investors to align their choices with their financial goals, risk tolerance, and time horizon. Diversification across different asset classes and periodic portfolio reviews can help strike a balance between risk and return. By exploring these investment options, investors can make informed decisions that better suit their financial objectives and potentially achieve better results than traditional Fixed Deposits.

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Rishabh P Nair
Rishabh P Nair is the Head Of Brand Content at Cube Wealth, the Financial Freedom App with a smart Perfect Portfolio Planner. Rishabh has been weaving stories for over 10 years and prides himself on building brands with a strong identity.

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