5 major differences between equities and fixed deposits

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Equities and fixed deposits are asset classes that are completely different. Here are 5 major differences between equities and fixed deposits.

Assured vs non assured returns

Returns from equities are not assured at all. While you can know the exact amount that you would get from a fixed deposit at the end of the fixed deposit term, there is no assured return from shares. You can either make or lose money. 

Equities come with considerable risk

Equities are risky and there is no guarantee that your principal amount would be protected. On the other hand, deposits like bank deposits are safe and defaults on bank deposits are unheard off.

Tax vs capital gains tax

Interest income earned from fixed deposits is taxable, while there is no long term capital gains from equities. Long term here is defined as a period of more than one year. Thus, if you have held a share for more than one year and sold it, no capital gains tax would apply.

Dividend vs interest

Equity shareholders receive dividend, while fixed deposit holders receive interest.

Fixed deposits offer an edge in terms of liquidity

Fixed deposits can be liquidated on the same day, while money from sale of shares would come on the fourth day after sale of shares.

Read more about: equity, fixed deposits
Story first published: Monday, August 11, 2014, 8:22 [IST]
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