One-time MF Investment vs PNB 5-year FD: Choosing the right investment avenue is key, when it comes to wealth creation. Many investors often face a dilemma between choosing for mutual funds or a fixed deposit, especially when planning for a medium-term horizon like five years. Here’s a comparison of how a one-time investment of Rs 2,50,000 fares in mutual funds versus a 5-year fixed deposit with Punjab National Bank (PNB).
Understanding Mutual Funds
A mutual fund is an investment option that pools money from several investors to deposit in a diversified portfolio of stocks, bonds and other securities. Each investor owns units that represent a portion of the holdings of the fund.
Returns from Mutual Funds over 5 years
Assuming a lump sum or one-time investment of Rs 2,50,000 and annualised returns of 8% to 12%, here’s how the depositors could grow:
What will be your return on investment of Rs 2.5 lakh in 5 years?
Mutual Fund Returns on 8% interest rate
- Invested amount: Rs 2,50,000
- Estimated returns: Rs 1,17,332
- Total value: Rs 3,67,332
Mutual Fund Returns on 10% interest rate
- Invested amount: Rs 2,50,000
- Estimated returns: Rs 1,52,628
- Total value: Rs 4,02,628
Mutual Fund Returns on 12% interest rate
- Invested amount: Rs 2,50,000
- Estimated returns: Rs 1,90,585
- Total value: Rs 4,40,585
Fixed Deposits
A FD (fixed deposit) is a traditional savings instrument where money is invested for a fixed tenure at a predetermined interest rate. Offered by banks and NBFCs, fixed deposits provide assured returns, making them a secure choice for investors.
However, the funds are locked in for the agreed tenure and premature withdrawals typically attract a penalty.
PNB 5-Year Fixed Deposit returns
For a one-time investment of Rs 2,50,000 lakh in a 5-year FD with Punjab National Bank, assuming the current applicable interest rate:
- Invested amount: Rs 2,50,000
- Estimated returns: Rs 95,105
- Total value at maturity: Rs 3,45,105
Mutual Fund vs Fixed Deposit
While fixed deposits offer capital safety and assured returns, mutual funds carry market risks but have the potential to deliver higher returns over the long term. For investors seeking stability and guaranteed returns, the PNB FD is a safe bet. But if you’re comfortable with market fluctuations and aiming for better growth, then mutual funds could be the more rewarding option over 5 years.
(Disclaimer: Don’t consider this as an investment advice. Do your own due diligence or consult an expert for financial planning)
