Bonds Vs Fd (pros and cons)

Fixed Deposits (FDs) and bonds are two safe ways to grow money in India, but they work differently for different goals. FDs give bank-guaranteed returns, while bonds pay fixed interest from governments or companies with chances for better yields but some extra risk.

Fixed Deposits Explained

FDs let you lock money with a bank for 7 days to 10 years at fixed rates (around 6.5-8.5% now). Interest pays monthly, quarterly, or at end.

Good sides:

• Super safe with government insurance up to ₹5 lakh per bank.

• Guaranteed returns—no market surprises.

• Easy options for seniors (0.25-0.5% extra) and flexible tenures.

• Borrow against FD without breaking it.

Bad sides:

• Returns barely beat inflation (real gain 3-4%).

• Early withdrawal cuts interest by 0.5-1%.

• Tax on interest above ₹40,000 (TDS deducted).

Bonds Explained

Bonds are like IOUs from government or companies. Buy at face value, get regular coupon interest (7-12%), and principal back at maturity (1-40 years).

Good sides:

• Higher returns than FDs, especially good corporate bonds (9-14%).

• Sell anytime on stock exchange if needed.

• Some tax perks like indexation on long-term gains.

• Prices rise if interest rates fall (extra profit).

Bad sides:

• Risk of company not paying back (check AAA ratings).

• Bond value drops if rates rise.

• Less liquid for some types; minimum ₹10,000.

• No insurance like FDs.

Head-to-Head Comparison

FDs win for absolute safety and simplicity—perfect for emergency funds or retirees. Bonds shine for higher income and trading flexibility, good for 5+ year goals.

Both beat savings accounts (3-4%). Mix them: 50% FD for safety, 50% bonds for growth. Ladder tenures (split across 1-5 years) to manage rate changes.

Start small via apps like Groww, Zerodha, or bank portals. Check ratings and match to your risk—neither beats equity long-term, but both protect capital smartly.