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Liquid Funds Vs Fixed Deposits - What Is Better?

Are liquid funds better than fixed deposits? This blog will give you an honest answer to the liquid mutual funds vs FDs debate by analysing their purpose, risk, historical returns, lock-in, and tax benefits.
November 8, 2024
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Bank fixed deposits have been the traditional, go-to option for Indian investors for over three decades. However, FD interest rates currently fall between 4-5%, far less than the returns offered by mutual funds.

Investment Facts

Naturally, there arises a need for an investment option that's just as safe as an FD but offers similar or better returns. Enter, liquid mutual funds.  

In this blog, we'll take a look at the difference between liquid funds and how it compares to traditional bank FDs in terms of returns, liquidity, safety, and availability of options.  

Difference Between Liquid Funds And Fixed Deposits 

1. Type Of Investment

Banks lend money to borrowers with the capital individuals invest in fixed deposits, savings accounts, and recurring deposits. That's why banks pay you interest in exchange for staying locked-in in FDs.

Liquid funds are debt funds that invest in relatively safe securities like T-bills, commercial paper, corpora

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