Worked Example
FD vs Equity-MF: which builds more wealth over 15 years?
Scenario
Anjali, age 35, mid-career marketing manager in Mumbai, ₹18 lakh annual income, married with one child, ₹70K monthly household expenses
Inputs
- Years
- 15
- FD tax %
- 30
- Amount INR
- 10,00,000
- FD return %
- 7
- Equity-MF tax %
- 12.5
- Equity-MF return %
- 12
Calculation
- 1.
FD effective post-tax rate
7% × (1 − 30% tax) → 4.9%
- 2.
Equity-MF effective post-tax rate
12% × (1 − 12.5% tax) → 10.5%
- 3.
FD corpus at year 15
₹10L × (1+0.049)^15 → ₹20.49 L
- 4.
Equity-MF corpus at year 15
₹10L × (1+0.105)^15 → ₹44.71 L
- 5.
Wealth difference
|2049426 − 4471304| → ₹24.22 L
Conclusion
Equity-MF wins by approximately ₹24.2 lakh over 15 years — driven by return rate.
Tradeoffs
Post-tax real returns matter more than nominal headline rates. FD loses more to taxation. Risk profiles differ too — guaranteed vs market-linked. Adjust for risk tolerance.