Why don't Mutual Funds give a fixed rate of return like a saving account or FD?

The returns in a Mutual Fund portfolio are a function of many things, like the avenues one has invested in, the way various markets move, the ability of the fund management team, and the investment period.

Since many of these factors are uncertain, the returns cannot be guaranteed, unlike a fixed deposit where these factors are absent, at least to some extent.

With a fixed deposit – the returns are FIXED only for a FIXED period. These returns and the period, both are decided by the issuer company and not by the depositor. Hence, if one wants to invest money for six years and a deposit is available for five years, the returns are known only for the first five years, but not for the entire six-year period. Thus, the investment returns are known only in case of guaranteed return products, where the product maturity and investor’s time horizon are matching perfectly.

In all other cases, the investment returns are unknown over the investor’s investment horizon.

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