Bitcoin, Mutual Funds or Fixed Deposit: Which Investment Option Should You Choose?

Bitcoin, Mutual Funds or Fixed Deposit Which Investment Option Should You Choose

Bitcoin is a cryptocurrency, which means the users use cryptographic functions for making financial transactions. Bitcoin is a computer code that holds monetary value. One can buy a Bitcoin and store it offline in his or her hard drive or store in the online software. 

On the contrary, a mutual fund is an investment option where an aggregate amount of money from different investors is taken, and the professional money managers invest the amount in various market instruments such as equities, stocks, bonds, shares, etc. The interest amount depends on market conditions, so it is regarded as a risky investment option. 

Whereas, in a fixed deposit, you invest a lump sum amount for a predetermined tenure and with fixed interest rates. Besides, fixed deposits higher interest rates, so you get higher returns. Further, the bank interest rates are fixed, so the performances don’t fluctuate depending on market conditions. 

As an investment instrument, Bitcoins, mutual funds, and fixed deposits have fascinated by different types of investors. All these investment methods can help you to gain more profit. But you should choose the investment option that suits you the best. To find out the best investment option let’s find the differences between these invest options –

Difference between Bitcoin, mutual fund and fixed deposit 

You must choose an investment option after considering your requirements and risk appetite. Bitcoin, mutual fund, and FDs are entirely different types of investment instruments. Knowing the difference between these types of investment may help you to make a better-informed decision. Some significant differences discussed below : 

Safety

Any agency does not secure Bitcoin, and it is priced based on speculation. The value of Bitcoins entirely depends on market demand and supply. Thus, it is a risky investment. If you are planning to invest in your retirement, then it is not suitable for you. 

On the contrary, profit from mutual funds depends on market conditions. You can do your homework and see which sector is performing well and then invest your money to reduce the risk. However, invest in mutual funds is tax-exempt up to Rs 1.5 Lakhs, according to section 80C. So, mutual funds are safer than Bitcoin investment. 

Unlike Bitcoins or mutual funds, the interest rate is fixed in FDs, so you get guaranteed returns from fixed deposits. But you have pay penalty fees if you withdraw money from FD before maturity. 

Returns 

When it comes to retunes, then fixed deposits are the best option. Because fixed deposits offer higher interest rates than any other investment tool. You can also calculate your returns beforehand by using an FD return calculator online. 

While the returns on a mutual fund are not secure because the interest rate depends on fluctuating market conditions, however, you can take expert advice and invest in equity-linked mutual funds to earn better returns. 

On the other hand, the way of earning from a Bitcoin is to sell them. It is very risky because the value of Bitcoins can change in seconds. The amount of Bitcoins depends on demand and supply. There is no proper way of investing in Bitcoins due to the instability of the cryptocurrency market. 

If you are willing to take the risk of earning more profit, then you can try investing in unsecured investment instruments like Bitcoins or mutual funds. But if you want to invest for your retirement or not willing to take any risk, then you can go for fixed deposits. 

Let us Gauge through some of the benefits of each investment plan :

Benefits of Investing in a Mutual Fund

  • There is an option for diversification. This can further help to mitigate the risk
  • A person can start with an investment starting from as low as Rs 500to Rs 100
  • A proper distribution in the equity funds can help to earn more returns
  • Professional financial experts will manage the funds
  • In case of surplus or extra amount, it can be easily distributed into other funds through top-ups
  • Option to choose from a variety of schemes such as Systematic Transfer Plan, Systematic Investment Plan, and Lump Sum. 

Benefits of Investing in Fixed Deposits

  • Most durable form of investment as the government authorizes it
  • Zero risk and high returns
  • Tax deduction possible upto Rs1,50,000 as per Section 80 C of Income Tax. 1961. It is preferable to have a tenure till five years.
  • Special schemes for a retirement plan. The interest income which is earned amounting to Rs50,000 will be tax-exempt. It is followed under the act of Sec 80 TTB of Income Tax Act, 1961. 

Benefits of Investing In Bitcoin

  • Opportunity to earn good returns when prices are high
  • No need to get caught in the trap of long-term plans. You can easily make a profit even during a short space of time. 

I hope that this blog would help you. FD serves as the best when going risk-free, Go for mutual funds if you are interested in diversification of funds — getting out of the traditional zone and trying hands on something new than Bitcoin will act as the best option.

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