Which is better investing in equity, mutual funds, or keeping money in banks?

Short Answer

Equity and mutual funds are perfect if you want to invest in companies while seeing your money grow in a short period. Moreover, the chances of compounding your investments are higher. But the risk associated is equally greater considering the growth of companies and their performance in offering returns. But then keeping money in the bank is the safest way to keep your earnings. But then, due to inflation and low returns on interest, that value of the money kept might be cut down drastically.

Detailed Answer

Money is the one parameter or metric that can either make someone’s life or break it. But then many believe that if you want to play It safe, then simple keep your money in banks, and the interest should be enough. At the same time, others believe in investments to see their money working overnight to fetch good returns. Nevertheless, you never really know which might be better; equity, mutual funds, or savings account. Let’s find out.

Investment Options - Where to keep your money?

1. Equity

Investing in equity is like buying a part of the company. While the investment dictates how much you gain, its less risky subjective of your investment. You can buy shares from a company and then keep them for the long term. Provided the company has any growth potential, you can gain off surpluses from them. But then there are factors of the company not doing good and causing the plunge in its valuation in the market. Another drawback is the price. To get sizable profits, you would have first to get that much capital and then invest. You could break down your investment bit by bit, but it would provide a greater return in the long run. Furthermore, the dividends that it provides is another bonus based on the number of shares you have; you can live off them or reinvest to increase the wealth and value of your portfolio.

2. Mutual funds

Mutual funds are nothing but a portfolio in which there are different types of companies which are either large-cap or medium-cap companies. Investors can pay a SIP or a lump sum amount to these funds headed by a fund manager who manages the mutual fund. The money invested started to grow with the growth of the companies and the market performance. Over time, you can expect your money invested to double, if not triple, in amount without any fear. Investing in mutual funds can start from as low as 500 rupees per month. The only drawback is that its completely tentative to the market, companies, and fund manager to regulate the fund and ensure that you have notable and feasible returns.

3. Banks

Money kept in banks often doesn’t grow as much as the other two options. No doubt it’s the safest place to keep your money, but then in the long term, you only earn interest on the money invested and nothing else. its simple interest and not compound interest. Moreover, with a savings account, the value of your money might depreciate over time, considering the inflation and overall growth of the economy.

Equity vs. Mutual Funds vs. Money in Bank

All of the three options that are showcased above tend to be feasible means of investments and safekeeping. If you want to grow your savings and even see it work overnight to fetch you considerable returns with a greater risk, then equity and mutual funds are quite feasible. But if you want stable returns only on the amount keep in your account, then a savings bank account is a viable option.

Tagged With: equitymutual fundssavings accountmoneybanks
Categories: Investment
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Related FAQs

How much money can we keep in savings account in India?

Savings bank account is one of the most popular banking services. There is no maximum amount of money that needs to be maintained. A person is liable to keep any amount of money in the savings bank account.

Are market highs good to invest in Equity mutual funds?

Understanding the relative position of the market, the absolute values do not matter much. What matters is what is the earnings multiple, currently the market is trading at, popularly captured by a metric called P/E ( Price to earnings).

How to invest in mutual funds with or without demat account?

Investors looking to invest in mutual funds without a Demat account can invest through financial institutions, independent financial advisors, AMC, and online portals.

How much money do you need to open a savings bank account in India?

To open a savings bank account in a private bank, you will have to make an initial deposit of around Rs 5,000 to Rs 10,000. However, there are some public-sector banks and other online banks where you can open your account without any deposit and get all the banking facilities.

Which is better FD vs. Mutual Fund vs. Real Estate Investment?

FD vs Mutual Fund vs Real Estate Investment has its advantages in terms of how much you invest and your investing period. Longer the period, higher the returns.

What is the difference Liquid funds vs. Savings accounts?

Based on return liquid funds outperform savings account by anything between, 2-4 % points which is 50-100 % higher return than the savings account. So, purely on the basis of returns investing in liquid funds seems a better option.

How can NRIs from the United States invest in Mutual Funds in India?

NRIs living in the United States can invest in Indian Mutual Funds, but there are some hassles that have to be overcome. You will require an NRE, NRO, or FCRN account in order to convert the foreign currency into Indian rupees, post which you can complete the KYC and begin investing in Indian Mutual Funds.

Which is better Zerodha or Groww for Mutual Funds?

Zerodha as well as Groww, both allow investors to invest in Mutual funds. Groww does not charge any Account opening fees or Annual maintenance Charges but Zerodha charges Rs 200 for Account opening and Rs 300 for AMC. This makes Groww a cheaper and better option when it comes to investing in mutual funds.

What is Mutual funds Consolidated Account Statement?

Consolidated Account Statement or CAS is a single account statement which consists of all the financial holdings and transactions in an investor’s portfolios.

Can I open 2 demat accounts with the same bank account?

Absolutely, you can open two or more demat accounts with one single bank account. You can, later on, add other bank accounts to your demat account as per your requirements.