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What is the Difference Between a Fixed Deposit and a Balanced Fund?

A fixed deposit is an investment where a certain sum of money is invested under this plan with a bank or NBFC with a view towards earning interest on the same. This interest is either paid out on a periodic basis, i.e. monthly, quarterly or half-yearly or is allowed to accumulate till the end of the fixed deposit tenor. At the time of maturity, the total accumulated interest is paid out along with the principal. Fixed deposit tenors vary from one financial institution to another. The biggest advantage of fixed deposits is that steady returns can be earned without any risks on account of market fluctuations or other changing circumstances.

Balanced funds are those where bond and stock components are combined and there is sometimes a money market based component too. These hybrid funds are generally restricted to a relatively fixed stock and bond mix as per the preferences of the investor, i.e. moderate/high equity component or limited equity component with higher fixed-income orientation. Balanced funds benefit investors who look for decent appreciation of capital along with decent levels of safety and income. Balanced funds, however, are not safer than fixed deposits since they will have exposure to market fluctuations.

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