Financial literacy and more
An assumption is that mutual funds just invest in equities but this is not correct.
Mutual funds can have access to any kind of asset class.
There are mutual funds that invest in debt too.
Mutual funds can also invest in gold so these give investors an exposure to a commodity.
There can be a mixture of various assets in a mutual fund portfolio too.
The interest payout on the fixed deposit depends on the institution where the deposit is made and the policies that it follows.
Some companies for example pay out the interest only annually on their fixed deposits.
Financial institutions and banks however give a larger choice for their investors.
Here the interest can be received either quarterly or half yearly or annually.
In some specific type of deposits only the option of a monthly payout of interest is available but this is rare,
There are different choices that are available to an investor when it comes to receiving the interest on the fixed deposit.
The basic choice that needs to be made is whether the interest should be paid out.
If the pay out choice is exercised then at a specified time period the interest earned till that period is given to the investor.
The other choice is to accumulate the interest that is earned on the fixed deposit.
In this case the interest would be received by the investor only at the time of maturity of the fixed deposit along with the return of the capital.
Banks are one of the most common institution where investors go to make a fixed deposit.
This is witnessed because deposits for banks are their primary route of raising funds .
In addition housing finance institutions and other large infrastructure institutions also offer fixed deposit choices.
Companies also offer an option of fixed deposits and these are known as corporate fixed deposits.
There are different risk and reward equations for each of these types of fixed deposits and investors should know this before they make their investment.
A fixed deposit can be made for a large number of time periods.
The choice for an investor with a particular institution depends on the options being offered by that institution.
Usually a bank will give more choices thus you can make a fixed deposit here for say 3 months if you have that time horizon or even 30 months if that is what you want.
Other financial institutions and companies might have a specific few choices available like 1 year, 2 year or 3 year deposits.
An investor should not assume that the time period available with every institution will be unlimited and hence should work towards matching their needs and the choice available.
A fixed deposit is a debt investment which means that the investor is lending money to an institution for a specific time period.
In a fixed deposit there is a pre determined time period for which the investment is made and this is known upfront like 91 days or 1 year or 3 years.
At the end of the time period the original amount invested is returned to the investor.
During the period of the investment there is an interest paid to the investor which is also known at the time of the investment.
This interest rate is locked in and thus the investor gets this return even if things change in the economy.