Sr.No Points of Difference Return on Fixed Deposit Investment Return on Stock Market Investment
1. Return Expected Can earn maximum Fixed Rate of Return of about 6%-7% Return is vary as per market conditions. There is potential to earn higher return due to Expertise received from Investment Advisors. Can earn a return in double digits without any maximum limit. Eg. 15%, 25%, 50%, 4%, -5%, etc.
2. Risk of Principal There is a minimal amount of risk of the principal amount invested. It is often considered as a risk-free source of investment. Due to Market Volatility, there is risk attached to the amount invested in stock market. However, due to analysis of Risk Appetite of an Individual along with Diversification of Investments in various stocks – Risk can be Minimized.
3. Inflation Effect It doesn’t take into account effect of Inflation. It takes into effect Inflation as Stock prices grow as per their actual performance in market which is after considering Inflation.
4. Taxation Benefit Returns are charged at the maximum marginal tax slab applicable to the Individual liable to pay tax- 5%, 20%,30%. Long-term gains arising on shares held for a period longer than 12 months are exempt from Tax due to STT paid on them. While Short Term gains arising on shares held for period shorter than 12 months are taxable at 15%.
5. Lock in Period – Illiquidity Fixed Deposit have lock in period of 2,3, 5 years respectively. The Amount invested is highly illiquid. There is no lock in period. The amount can be readily withdrawn anytime you want. It is high liquid.
6. Early Withdrawal – Penalties Banks Impose heavy Penalties of almost 1% of amount invested on early withdrawal. The Amount invested is highly liquid. There is no lock-in period, so a person can remove funds anytime he wants.
7. Tenure – Long Duration Fixed Deposit requires people to keep their amount invested for long duration 2,3,5 years respectively. There is no specific tenure. You can exit a stock after booking profits on reaching your target price & re-invest the same amount in another stock. Thereby a chance to earn higher returns.
8. Portfolio Formed as per Risk Appetites of Individual There is minimal amount of risk on amount invested in Fixed deposit. First the Risk Appetite of an Individual is understood. Then depending upon his capacity & willingness to take risk, a portfolio is formed by process of diversification of stocks to minimize the risk to an optimum level.

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