Savings Account vs Mutual Fund – Make Your Money Work Harder
Your money can work harder than a saving account – without locking it away. Designed for investors seeking better returns than a traditional savings account, mutual funds can offer higher growth while keeping your money relatively liquid.
While savings accounts are safe and convenient, they often fail to beat inflation over the long term. Mutual funds, on the other hand, allow your money to grow by investing in diversified instruments such as bonds, stocks, and money market securities.
How Different Investment Options Compare
Here’s a historical illustration showing how ₹10 Lakh invested in various options could grow over 5 years based on past performance:
| Type | Average Return % | Value 1 Year (₹) | Value 2 Years (₹) | Value 3 Years (₹) | Value 4 Years (₹) | Value 5 Years (₹) |
|---|---|---|---|---|---|---|
| Low Duration Fund Short-term debt fund, low risk, moderate returns | 6.57% Average historical annual return | 10,65,700 | 11,35,716 | 12,10,333 | 12,89,852 | 13,74,595 |
| Ultra Short Duration Fund Low-risk debt fund, highly liquid | 6.05% Average historical annual return | 10,60,500 | 11,24,660 | 11,92,702 | 12,64,861 | 13,41,385 |
| Arbitrage Fund Equity-debt strategy to reduce volatility | 5.73% Average historical annual return | 10,57,300 | 11,17,883 | 11,81,938 | 12,49,663 | 13,21,269 |
| Saving Account Bank savings account, very low risk | 3.50% Average historical annual return | 10,35,000 | 10,71,225 | 11,08,718 | 11,47,523 | 11,87,686 |
| Current Account Bank current account, zero interest | 0.00% No returns, principal is safe | 10,00,000 | 10,00,000 | 10,00,000 | 10,00,000 | 10,00,000 |
Key Insights
- Higher Returns, Moderate Risk: Mutual funds like low duration, ultra short duration, and arbitrage funds historically outperform savings accounts while offering liquidity.
- Safety vs Growth: Savings accounts preserve capital but provide low returns; mutual funds carry slightly higher risk but potential for better growth.
- Inflation Protection: Over time, mutual funds can help your money stay ahead of inflation, unlike traditional savings accounts.
Why Consider Mutual Funds Over Savings Accounts
- Better Returns: As seen in the table, even conservative funds provide higher average returns than typical savings accounts.
- Flexible Investment Horizon: You can invest monthly (SIP) or lump-sum and redeem anytime.
- Diversification: Professional fund managers invest across bonds, equities, and money markets to balance risk and reward.
- Liquidity: Many debt and hybrid funds allow redemption within a day or two, unlike fixed deposits.
“Start making your money work smarter today – reach out and let us help you choose the right investment for your goals.”
Disclaimer:
“The above examples are illustrative only and do not represent actual scheme performance. Mutual Fund investments are subject to market risks. Please read all scheme-related documents carefully before investing. Past performance is not indicative of future returns. Principal is not guaranteed.”
For official mutual fund data and SIP resources, visit AMFI