Against the common perception, fixed deposit is not the peace of mind but just tranquilizer which kills investors' growth potential silently. In other words, you are hiring a security guard whose salary is more than your salary. Following chart is showing 10 years relative growth of fixed deposit, inflation, and SENSEX.



In the above chart fixed deposit returns have been depicted as absolute value. It has not corrected tax impact which may go up to 30% or more for individuals. In such a scenario inflation is always higher than fixed deposit return. In layman's terminology, our purchasing power is shrinking if we are dependent on fixed deposit growth. Following table is depicting what you can buy now (on left side) with a certain amount of money, the same money with fixed deposit interest will not be able to buy the same stuff after a few years.

Anybody can co-relate the same by recalling apparel price 5 years ago and compare with the current price of the same apparel. Same comparison can be done for grocery price of the last 3 years and education cost for the last 10 years. SENSEX growth depicted in earlier chart is actually showing more than 20% yearly (CAGR) growth rate. This is evident from the following graph.

(If you are not familiar with SENSEX and NIFTY then assume they are synonym and they depict average growth rate of the stock market. For more details Click Here). Conclusion: Fixed deposit interest is always behind inflation and far behind the stock market growth in long term. Our Portfolio Builder tool proves the concept that if one allocates money in the stock market in truly diversified way and does weekly review of the trend then it is easy to align the growth of investment with the market return. To know more about diversification and weekly monitoring process please see our other section Secret Behind

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