SBI FD vs Mutual Fund: State Bank of India changed its fixed deposit rates on deposits below Rs 2 crore from Wednesday (December 27, 2023). Investors with investment limit of less than a year and from 3 to 5 years are the biggest beneficieries of revised rate. As a result, the investors in SBI FD will get more richer as they will get a higher return. SBI FDs are quite popular among investors seeking guaranteed returns and fixed income. Since, an FD is not market-linked, it is a popular investment option among investors with low-risk appetite. One can invest a lump sum minimum amount of Rs 1,000 to no maximum limit for up to 10 years.

On the other hand, mutual fund investment through systematic investment plan (SIP) and lump sum is also gaining popularity given the historic returns the investors have gotten in the last one decade. Mutual funds are market-linked and their value may increase or decrease with the performance of the share market. 

SBI FDs and mutual fund investment have their positives and negatives. While FD keeps your investment secure, mutual fund investment may give you returns many times than you may got in FDs.

In this write-up, we will show you how the same amount of investment in SBI FD and mutual funds (lump sum) may give you completely different results in 3, 5 and 7 and 10 years.

Here is the calculation

SBI FD vs Mutual Fund: Rs 1 lakh investment in 3 years

The SBI FD interest rate for the duration of three years to less than five years is 6.75 per cent, while for senior citizens, it is 7.25 per cent.

On the other hand, there is no fixed return in mutual funds.

However, given the historic return, we can assume a return of 12 per cent annually.

Mutual fund also provides you opportunity of compounding where your principal amount changes every cycle, and you get return on the entire amount, not just the initial principal amount.

In SBI FD, one would earn an interest of Rs 22,239 at 6.75 per cent interest rate on Rs 1 lakh investment and the total return one will get in that period will be Rs 1,22,239. 

If you invest Rs 1 lakh lump sum in a mutual fund with a 12 per cent return, you will get Rs 40493 as gains and your total future value will be Rs 1.4 lakh.    

SBI FD vs Mutual Fund: Rs 1 lakh investment in 5 years

The interest rate in SBI for investment duration of five years and above will be 6.5 per cent unlike 6.75 per cent for 3 years and less.

In SBI FD, you will get an interest of Rs 38042 in five years, and the return you will get will be Rs 138042. 

In a mutual fund, your Rs 1 lakh lump sum will give you gains of Rs 76,234, and you will get Rs 176234 after 5 years.  

SBI FD vs Mutual Fund: Rs 1 lakh investment in 7 years

In SBI FD, a seven-year Rs 1 lakh investment will give you an interest of Rs 57,042 and you will get a return of 1,57,042.

In a mutual fund, the same investment will give you a return of Rs 2.21 lakh in seven years.

SBI FD vs Mutual Fund: Rs 1 lakh investment in 10 years

Since 10 years is the maximum limit of FD investment, you will get an interest of Rs 90,556 and your total return will be Rs 190556.

In a mutual fund, you may earn Rs 2.11 lakh with a lump sum investment of 10 years, and your total return will be Rs 3.11 lakh.