Fixed deposits and debt mutual funds are among the most popular assets for risk-free investors. Despite rising interest rates, fixed deposits have proven to be a reliable option for Indian retail investors, while debt funds are mutual funds that invest in debt securities. Debt funds generally show to provide better annual returns than FDs, although bank FDs have a lower risk profile thanks to DICGC protection. Risks associated with debt mutual funds include credit risk, interest rate risk, inflation risk and reinvestment risk, while risks associated with fixed deposits include liquidity risk, default risk and inflation risk. Although the two investment categories are mostly equivalent in terms of risk and returns, there are significant tax differences between debt funds and fixed deposits.