There’s no doubt that mutual funds have become one of the go-to investment options for all investors – new or experienced. Investors are currently more drawn to mutual funds than small savings schemes such as Kisan Vikas Patra (KVP), bank fixed deposits (FD), Public Provident Fund (PPF), National Pension System (NPS), Post Office Recurring Deposit (Post Office RD), etc. According to the recent Reserve Bank of India (RBI) reports, merely Rs 40,249 crore deposits were made against this small-savings scheme compared to Rs 275,682 crore deposits made towards mutual funds same period. This article comprehensively guides a small savings scheme and mutual funds.


What is a mutual fund?

Mutual funds are investment vehicles comprising a portfolio of different securities such as equities, bonds, cash, cash equivalents, etc. A fund house pools the money of various investors and invests in foreign securities according to the fund’s investment objective. A mutual fund is professionally managed by an expert known as a fund manager. Fund managers have in-depth knowledge, understanding, and skills about the functioning of the stock markets.

What is a small savings scheme?

Small-savings schemes are one of India’s most important household savings sources. The central or state government runs these schemes to help investors save money for their future.

Why are mutual funds more popular than small savings schemes?

One of the reasons for the increased popularity of mutual funds among investors instead of savings schemes is that the interest in small savings schemes has significantly decreased after being linked to government bonds and securities. On the other hand, mutual funds can offer returns as high as 15-20% p.a.

Another reason could be the increased awareness initiatives by the Indian statutory bodies and market regulators – The securities and Exchange Board of India (SEBI) and the Association of Mutual Funds in India (AMFI). These regulatory bodies have constantly tried to popularize mutual fund investments among retail investors. Additionally, efforts were made to penetrate the mutual fund markets in Tier-II cities. All in all, significant returns and marketing by the central government in favor of mutual funds could be one of the reasons why mutual funds are more popular than small savings schemes.

Where should I invest my money?

Whether you decide to move forward with small-savings schemes or mutual funds entirely depends on your investment portfolio. If you are a conservative investor, then a small savings scheme could be an ideal bet for you, as the government of India backs these savings schemes. However, if you are comfortable taking risks to earn higher returns, you might want to invest in mutual funds. Ensure your investment is aligned with your investment horizon, financial goals, and risk appetite. Happy investing!


Troublemaker. Wannabe music fanatic. Beer aficionado. Devoted food junkie. Twitter fan. Freelance thinker.Won several awards for analyzing sheep in Cuba. Spent 2002-2009 promoting action figures in the UK. What gets me going now is getting to know pond scum in the UK. Won several awards for investing in toy soldiers on the black market. Spent several months getting my feet wet with spit-takes in Gainesville, FL. Spent 2002-2009 testing the market for tobacco in the aftermarket.