Bank fixed deposits: Bank fixed deposits are secure investments and you can park your money in a fixed deposit anywhere from 30 days to 10 years. While you have the option to withdraw the money before the maturity date it’s advisable to withdraw it only after because this instrument is not very liquid in nature. For example, if you invest in a two-year fixed deposit, which yields a 10% interest rate and you decide to withdraw the funds after six months then the bank will pay you an interest rate that was valid for a six-month fixed deposit, which could be 6% at the time you had invested. Plus, if you withdraw money before the maturity date, depending on the bank, you could end up paying up to 1% of the interest charged as penalty.
Money market accounts: Popularly known as liquid funds, money market accounts are a special category of mutual funds, which invest in several money market instruments such as term deposits, commercial papers, etc. The underlying assets in liquid funds usually have maturity periods of less than 91 days enabling high liquidity. The tenure of a liquid fund is always less than a typical mutual fund and offers higher interest than savings accounts. Usually, large institutions invest their money in liquid funds but as an individual investor if you want to earn above-average returns and beat inflation then this is a good option. READ MORE
