FD (Fixed Deposit) and Bonds are both financial instruments used for investing and earning returns, but they have some key differences. Here's an explanation of each:
Fixed Deposit (FD): A Fixed Deposit is a financial product offered by banks and other financial institutions. It involves depositing a specific sum of money for a predetermined period, typically ranging from a few months to several years, at a fixed interest rate. The interest rate offered on FDs is usually higher than regular savings accounts, making it an attractive option for individuals seeking relatively stable returns.
Bonds: Bonds are debt instruments issued by governments, municipalities, corporations, or other entities to raise capital. When an investor buys a bond, they are essentially lending money to the issuer for a fixed period. In return, the issuer promises to pay periodic interest payments, known as coupon payments, and return the principal amount (face value) at maturity.
Both Fixed Deposits and Bonds offer relatively stable returns, but FDs are typically offered by banks, while bonds are issued by governments or corporations. FDs are more accessible to retail investors and have shorter tenures, while bonds may have longer tenures and can be traded on the secondary market. The choice between the two depends on factors such as investment goals, risk tolerance, liquidity requirements, and prevailing interest rates. It's advisable to consult with a financial advisor to determine the most suitable investment option based on individual circumstances.
