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

Last Updated: 23-Jun-2021

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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