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How is a guaranteed investment different from other investments?

Curious about guaranteed investment

How is a guaranteed investment different from other investments?

A guaranteed investment is different from other investments in that it offers a guaranteed return of principal investment, along with a fixed or variable rate of interest. The main differences between guaranteed investments and other types of investments in India are:

1. Risk: Guaranteed investments are considered to be lowrisk investments, as they come with a guarantee of principal protection. Other types of investments such as stocks, mutual funds, and real estate are subject to market fluctuations and may have higher volatility, which can lead to potential losses.

2. Returns: Guaranteed investments typically offer lower returns than other types of investments. For example, fixed deposits in India may offer returns of around 56% per annum, while stocks or mutual funds may offer higher returns, but with higher risk.

3. Liquidity: Guaranteed investments may have limited liquidity, as they often come with penalties if you need to withdraw your funds before the maturity date. Other types of investments such as stocks and mutual funds may offer greater liquidity and flexibility.

4. Investment horizon: Guaranteed investments may have a fixed investment horizon, such as 1 year, 5 years, or 10 years. Other types of investments may have a longer investment horizon, such as retirement plans, or shorter investment horizons, such as day trading.

5. Taxation: Guaranteed investments such as fixed deposits are subject to TDS (Tax Deducted at Source) and are taxable. Other types of investments such as equity mutual funds and ELSS (Equity Linked Saving Schemes) may offer tax benefits under certain conditions.

It's important to consider these differences when deciding which type of investment is best for your financial goals and risk tolerance. It's also important to diversify your investment portfolio across different types of investments to manage risk and maximize returns.

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