1) The Basics
In order to decide which is best for one’s financial needs, we must know how they work. In case of savings account, you are usually eligible for higher interest rates by maintaining a high minimum balance. On the other hand, in mutual funds, an investment firm will pool your money with other investors and then invest the money in stocks, bonds, and other securities.
There is no real risk involved with the savings account. But in case of mutual funds, are though being managed by professional fund managers, but still, the risk involved is there and also the investor has to pay a huge amount as institutional fees in the beginning.
3) Rates of Return
The rate of return in case of savings account is usually low around 4-5% while in case of mutual funds it is normally 14 to 15%.
There is not much potential for growth of money in savings account as one only receives interest and that too is a very small percentage while in case of mutual funds the money can grow several times as a result of the power of compounding.