Is there a reason Mutual Funds do not offer a fixed rate of return like savings accounts and FDs?

mutual funds


There are many factors that affect the return on a Mutual Fund portfolio, including the avenues in which one has invested, the market movements, the management team’s skill, and the time period in which investments are made.

mutual funds
Mutual Funds

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Due to that uncertainty, returns cannot be guaranteed, unlike fixed deposits, where these factors are absent, at least to some extent.

With a fixed deposit, returns are FIXED only for a specific period of time. These returns, as well as the period, are determined by the issuer company, not by the depositor. A deposit for five years is available for six years, so one can only know the returns for the first five years, but not for the entire six-year period. Consequently, the return on an investment is only known when the maturity of the product and the investor’s time horizon are perfectly aligned in the case of guaranteed return products.

Regardless of the investor’s investment horizon, the investment returns are unknown.


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