Is Fixed Deposit Better Than Unit Trusts


Investment has become a familiar name amongst bread earners. Though there are various sources to invest their funds in, yet, fixed deposits and unit trusts are common investments preferred by a lot of people. But to choose one amongst the two, it is better to know which one is beneficial out of the two. A fixed deposit is an investment facility that allows the investor to deposit their money as a fixed deposit for a fixed tenure at an interest rate that may differ across all banks. The offered Fixed deposit interest rates is comparatively higher than a savings account, and thereby it is preferred by a lot of people. A unit trust, on the other hand, is an investment option wherein the investors invest their money in the unit trust companies, which further invest the funds into the shares of the company that are listed on the stock exchange.

Which is better a fixed deposit or a unit trust?

The question as to which one is better amongst the fixed deposit or the unit trust often confuses various lenders about the investment of their funds. However, to choose one amongst the two, a comparison must be made based on specific criteria. These are listed as follows:

Risk factor: When it comes to the risk factor, fixed deposits are comparatively safer than a unit trust. This is because the unit trust investment is dependent and relative to the ongoing trusts in the market. This means that the fluctuating trends in the market can lead to higher risk on the unit trust. Fixed deposits, on the other hand, are offered by authentic lenders such as banks. Also fixed deposits up to Rs 5 lakhs are ensured by the Government.

Fixed returns: The returns on the fixed deposits are guaranteed as the banks tend to provide interest rates on the fixed deposits. The interest rates may be higher or lower across different Fd providers, but one is bounded to get a return on fixed deposit. The interest rates on fixed deposits currently provide maximum interest rates up to 8.00%. The returns on unit trust, however, is not sure, as it may either increase or decrease unexpectedly as per the market trend. However, while the returns on the fixed deposits are assured, yet at time Unit trust can provide unexpected returns to the investors, which may be sky-high.

Fees and charges: To open a fixed deposit, many banks tend to impose a minimum amount requirement. Also, premature withdrawals on fixed deposits can also force the bank to charge penalties. UnIt trusts, on the other hand, involves fees like administration, adviser’ fees and management fees. Before investing fund into any of these, it is better to get detailed information on all the expenses incurred.

Accessibility in times of needs: When it comes to using funds in times of need, fixed deposits are less convenient, as breaking fixed deposits before the premature time could impose penalties and loss of interest rates. Unit trusts investment, on the other hand, can provide instant liquidity as funds can be easily converted into cash.

Thereby, on a concluding note, it must be understood that both fixed deposits and unit trusts have their own merits and demerits associated with them. However, to choose one amongst the two, the investors should analyze the features as per their own convenience and then should proceed further for investment.


Both the fixed deposit and unit trusts are common forms of investment options that people prefer to invest their funds. However, the choices of the people often remain confused and divided when it comes to choosing one amongst the two. Thereby, a comparison needs to be made between the two on some parameters such as accessibility, fees and charges, risk factor and returns.

  • Fixed deposits offer less accessibility as funds are difficult to withdraw before the premature time. Unit trusts, on the other hand, can be used in times of emergency without any compromise on the returns.
  • Fees and charges are other points of concern that be considered before going into an investment. Unit trust involves fees like the management and the adviser fees, while fixed deposits involve minimum account requirements and premature withdrawal charges.
  • When it comes to returns on investments, the returns on fixed deposits are prefixed as per the interest rates that the provider of the fixed deposit offers. The returns on the unit trust, on the other hand, are based on the trends in the market.
  • The risk factor associated with the fixed deposit is comparatively lower than a unit trust. This is because the fixed deposit up to Rs 5 lakhs is insured by the Government of India, while no insurance is provided on the unit trusts.

Thereby, on a concluding note, one must access the required parameters and choose the best deal as per their financial ability.


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