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Long Term Fixed Deposit vs ELSS – Equity Linked Saving Schemes, also known an ELSS and Fixed Deposit (FD) consider as good options when it comes to investments. Many people either invest in ELSS or FD to double the amount of their savings, but choosing the right option might get difficult. ELSS and the FD process of generating money is entirely different from each other, therefore the returns for each investment method would vary a lot. Here is how ELSS and FD savings-investment work:
Equity Linked Saving Scheme (ELSS)
Equity Linked Savings Scheme is an investment program through which a citizen can gain tax benefit under the Income Tax Act, Section 80C. This program is a type of a mutual fund where you can apply for short term investment, the time period for this type of investment method is up to 3 years, not more than that.
The returns for this type of investment has a high risk as to the returns depend on the state of the market. If the market is not doing great there are chances you might not receive money for that particular month or year.
And the return gained is not fixed as the market fluctuates every month. Once applied, ELSS cannot be liquefied or discontinued before the maturing date, i.e. 3 years from the application date. Therefore, during financial emergencies, ELSS might not be able to provide you with the right support.
Long Term Fixed Deposit (FD)
Fixed Deposit is another type of investment program which is considered as the safest option. In this type of investment method, certain fixed amount is deposited within the bank chosen, you can either deposit the money in a lump-sum or deposit in installments, therefore the tenure for this type of investment is for the long term.
There are two types within Fixed Deposit (FD) i.e Tax-Saver and Regular, which can last up to 5 to 10 years. Different from ELSS, FD provides returns without considering the external factors like the market or the economy.
The risk of not gaining the returns is zero; therefore the public prefers choosing FD while investing their savings. This type of investment can be liquidated at any point during the 5 years or 10 year tenure after the application date but the Tax-Saver FD can only be liquidated after the completion of the 5 year tenure due to Section 80C.
Multiple people together can open an FD, which can also be applied online; it can also be availed with the help of credit cards (if you have a good credit score)
The above mentioned saving investment methods will help you generate money or double your money for your future. Even though there are multiple risks while investing in Mutual Funds, ELSS also provides greater returns than a long term fixed deposit.