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Fixed Deposit vs Debt Funds vs ETF

Fixed Deposit Vs Debt Funds Vs Bharat Bond ETF

Many times, investors are confused when there are multiple investment products to choose from. The same is the case for Bharat Bond ETF, Fixed Deposit and Debt Funds. A detailed comparison among the three will help you determine which you should buy.

Investment Horizon - From the three, a bank fixed deposit account comes with the shortest investment horizon - 7 days. Debt funds are open ended schemes with no lock-in period and an investor can withdraw money anytime. Bharat Bond ETF can be further classified into - Bharat Bond for 3 years and Bharat Bond for 10 years. The two schemes have a maturity date of 3 and 10 years but one can exit the schemes by selling the script in the stock market.

Risk - A bank fixed deposit comes with minimum risk as it is least likely for a bank to go defunct. In addition, bank deposits including money in a savings account, fixed deposit etc. are insured up to Rs. 1 lakh per bank branch under DICGC. In the case of debt funds, there are no guarantees of returns and principal invested in the mutual fund. The returns are based on the underlying securities which comprise of corporate bonds and money market instruments. Bharat ETF is relatively safer than debt funds holding corporate bonds because Bharat ETF primarily invests in PSU bonds with AAA rating.

Taxation - The interest income earned from an FD is taxable as per the rate defined in the income tax slab. For Debt Funds and Bharat ETF, the taxation depends on the duration of investment. Gains realized within 3 years are taxed as per the individual tax rates. Gains realized post 36 months are taxed at 20% post indexation benefits.

Returns - The current rate of return for a bank fixed deposit is around 6% to 6.5% for a duration of 1 year. Returns under a debt fund are dependent on the performance of the underlying instrument and movement of interest rates in an economy. In the case of the Bharat Bond ETF, the annualised yield on Nifty BHARAT Bond Index April 2023 was 6.69 per cent, while the annualised yield on Nifty BHARAT Bond Index April 2030 was 7.58 per cent.

Investment Process - Opening a bank FD account is simple, it can be done online or by visiting the bank branch with relevant KYC documents. In order to invest in a debt fund, you need to visit the official website of the Asset Management Company or mutual fund house and apply for a particular fund. For Bharat Bond ETF, one needs a demat account. Those who don't have can invest via Bharat Bond Fund of Funds with similar maturity in line with the underlying ETF.


If you want to select any of the three investments, you need to understand your risk appetite, income slab and financial goal. Also, you can invest in all three and build a diversified portfolio.

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