HDFC bank versus HDFC bank’s FD; What if you had invested Rs 1 lakh each? read the complete analysis!

In this article, we are comparing what would have happened if investors had invested Rs 1 lakh on the same day five years ago in both the shares of HDFC Bank and HDFC Bank’s FD.

Young investors these days tend to prefer investing in things like stocks, mutual funds, or even commodities like gold and silver over putting their money into fixed deposits. However, the generation above them still likes fixed deposits because they see them as a safe way to keep their money. They think stocks are riskier, while fixed deposits give them a sense of security.

Neither side is completely right or wrong. It all depends on how old you are and how much risk you're comfortable with. Having fixed deposits as part of your investment plan and putting some money into them isn't a bad idea.

When you invest in stocks, you need to know a lot about the economy, different industries, and specific companies, as well as how those companies are doing compared to their competitors. Picking the right company can make you a lot of money, but if you choose the wrong one, you could end up losing money if you're not careful.

In this article, we're going to look at what would have happened if someone had invested Rs 1 lakh in both shares of HDFC Bank and in an HDFC Bank fixed deposit five years ago, to compare how much money they would have made.

Also read Two situations when rupee cost averaging doesn't work in the market! Read the complete article before closing your mutual funds!

Returns Comparison

HDFC Bank, being the biggest private bank in India and the third-largest company by market capitalisation of around Rs 11,01,162 crore after Reliance and TCS, currently shares trading at Rs 1448.30 per share on the BSE.

Over the past year, this Large-Cap bank’s shares have delivered a negative return of around 11.90 per cent, while other banking stocks have delivered impressive multibagger returns, regardless of whether they belong to the government or private sector. Additionally, during the same period, the Sensex delivered a return of 17.23 per cent.

If you had invested Rs 1 lakh in HDFC Bank shares on the same day five years ago, you would have seen a return of around 26.4 per cent, meaning the investment of Rs 1 lakh would now be around Rs 1.26 lakh in five years.

On the other hand, Fixed Deposits or FDs serve as long-term investment tools that help investors save money over extended periods. Investors can choose a fixed tenure for the deposit to remain with the bank. Assuming the same amount of investment in the FD five years ago with monthly compounding, it would accumulate to Rs 1,41,498 at an annual interest rate of 7 per cent, which is slightly higher than the returns generated by the shares of HDFC Bank during the same period. This is achieved without taking much risk, as equity is considered a risky asset with the potential of losing the invested capital.

Despite being the biggest name in the banking sector, HDFC Bank has yet to generate attractive returns for its shareholders, with the shares of the bank delivering a return of around 282 per cent in the past decade. This return is obviously lower than other stocks, where some give multibagger returns within just one year.

FD is Best For these Investors:

Conservative Investors: Investors who are risk-averse and prioritize the preservation of their capital often prefer FDs due to the guaranteed returns and low risk of loss.

Ideal funds: FDs are suitable for individuals who have short-term savings goals and need a secure place to park their funds for a specific period, such as saving for a down payment on a house or a vacation.

Retirees: Retirees who rely on a fixed income stream for their living expenses often prefer FDs as they provide a steady source of interest income without the volatility associated with other investments like stocks.

Emergency Fund Builders: FDs serve as an ideal option for building an emergency fund as they offer liquidity and stability. Investors can access their funds quickly in case of unexpected expenses or emergencies.

Investors with Low-Risk Tolerance: Individuals with low-risk tolerance or those who cannot afford to take on significant investment risk may opt for FDs as a safe and reliable investment option.

Individuals Seeking Predictable Returns: Investors who prioritize predictable returns and prefer to know exactly how much they will earn on their investment may find FDs appealing, as the interest rates are fixed for the duration of the deposit.

Disclaimer: The article is for informational purposes only and not investment advice.