Many people go for bank FDs. Some go for Govt bonds. Which one is better?
There is no one-size-fits-all answer to whether government bonds are better than bank fixed deposits (FDs). The decision depends on individual financial goals, risk tolerance, and investment horizon.
Government bonds typically offer higher interest rates than bank FDs, but they come with their own set of considerations. One key factor is liquidity. If an investor can hold the money until maturity, bonds can be an attractive option.
The choice between long-duration bonds and shorter-term bank FDs also depends on the economic outlook. As the economy develops over time, interest rates may decrease. It’s a common trend that matured or developed economies generally offer lower interest rates compared to developing economies. If an investor locks in a high interest rate with a long-term government bond, like a 40-year bond at 7.25%, and the country becomes more developed by the time of maturity, the bond’s interest rate may prove advantageous compared to potentially lower bank interest rates.
DISCLAIMER: I AM NOT A REGISTERED INVESTMENT ADVISOR
3 Likes