5-Year Investment Battle: Liquid Funds vs FD vs RD vs Gold — Which Grows Your Money Best?
Investing wisely is the key to building Wealth and securing your financial future. But with so many options available — from Liquid Funds, Fixed Deposits (FD), Recurring Deposits (RD) to Gold — which Investment truly gives you the best Returns while managing Risk? This Case Study explores how a Monthly Investment in each of these Assets Grows over 5 Years, revealing their Risks, Returns, and overall potential to build your Wealth.
The Investor's Scenario
Meet Rahul, a disciplined Investor who decides to Invest ₹10,000 every Month for 5 Years (60 Months) consistently. Rahul evaluates four popular Investment options:
Liquid Fund
Fixed Deposit (FD)
Recurring Deposit (RD)
Gold
Assumptions and Calculation Methodology
Monthly Investment: ₹10,000
Investment Period: 5 Years (60 Months)
Returns are Compounded Annually for Liquid Funds and Gold.
FD and RD assume Fixed Interest Rates Compounded Quarterly (typical Bank practice).
1. Liquid Fund
Liquid Funds Invest in Short-Term debt securities. They offer higher Returns than a Traditional Savings Account and better Liquidity than FDs.
Expected Annual Return: 7.5% (Compounded Annually)
Total Invested: ₹10,000 × 60 = ₹6,00,000
Profit Earned: ₹7,12,000 - ₹6,00,000 = ₹1,12,000
Risk: Moderate — Market fluctuations can impact Returns but relatively stable compared to Equities.
2. Fixed Deposit (FD)
FDs are safe, Fixed-Return Investments offered by Banks.
Expected Annual Return: 6.5% Compounded Quarterly
Total Investment = ₹6,00,000
Calculating FD Maturity value for recurring Monthly Deposits:
The exact Calculation can be complex; approximately, the Maturity value comes to ₹6,90,000.
Profit Earned: ₹6,90,000 - ₹6,00,000 = ₹90,000
Risk: Very low — Capital Guaranteed by the Bank, no Market Risk.
3. Recurring Deposit (RD)
RDs are similar to FDs but with Fixed Monthly contributions.
Expected Annual Return: 6.5% Compounded Quarterly
Total Investment: ₹6,00,000
Calculation similar to FD yields Maturity of approximately ₹6,90,000.
Profit Earned: ₹90,000
Risk: Very low — Capital Guaranteed.
4. Gold
Gold is a Traditional Investment and a hedge against Inflation.
Expected Annual Return: 9% Compounded Annually (based on historical average)
Total Investment: ₹6,00,000
Profit Earned: ₹1,54,000
Risk: Medium to High — Gold prices can fluctuate significantly due to global economic factors.
Which Investment Is Right For You?
Liquid Funds offer a healthy balance of good Returns with Moderate Risk and easy Liquidity, ideal for Short-to-Medium-Term goals.
Fixed Deposits and Recurring Deposits Guarantee your Capital with steady but modest Returns — perfect for Risk-averse Investors seeking safety.
Gold can provide higher Returns and Diversification but carries more price volatility.
Your choice depends on your Risk tolerance, Investment horizon, and Liquidity needs. Diversifying across these instruments may provide the best balance of Growth and Safety.
Disclaimer:
This article is for informational purposes only. Returns and risks vary with market conditions. Please consult a financial advisor before investing.
Trisha Kesarwani
Fintech Specialist
Asiatic In Corp
LinkedIn -
https://fs.blabigo.com/s/3mjdTRUA
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