Ch.1 · Savings vs Investment Avenues · medium
Which of the following is a key disadvantage of a Bank Fixed Deposit (FD) compared to a mutual fund?
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EXPLANATION
Bank FDs offer capital protection and guaranteed returns, but interest is taxable at the investor's slab rate. For investors in the 30% bracket, real post-tax returns on FDs may be negative after adjusting for inflation — a key limitation vs. tax-efficient mutual funds.
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