I have ₹20 lakh in savings account. Should I invest in Mutual Funds or KVP for my granddaughter?

77-year-old Satyendra Kumar Srivastava has ₹20 lakh in his savings account. As he is getting older by the day, he plans to invest this amount in the name of his granddaughter, who is currently just 10 years old.

However, Srivastava is not sure how and where to invest this amount so that he can be "immortalised" in his granddaughter's world.

Someone has suggested that Srivastava invest the amount in mutual funds. He has also received suggestions to invest in Kisan Vikas Patra (KVP).

Recently, Srivastava shared his dilemma with us and sought advice.

"I have ₹20 lakh in my savings account. I am 77 years old. I want to bequeath this money to my granddaughter, who is now 10 years old. How best can it be done, or invested in an instrument so that when I am no more, it will take care of her studies after say 10 years, and also I will be immortalised in their world. Someone suggested going for the mutual fund, some for Kisan Vikas Patra. Kindly suggest," he wrote in an email on April 15, 2025.

In this section, we do not provide any specific investment advice about market-linked products such as mutual funds.

Investment decisions are personal and depend on an individual’s understanding of the financial product, financial goals, risk appetite, and a lot of other factors that may vary from person to person.

However, readers like Srivastava can find help from the following points about both KVP and mutual funds:

Mutual funds and KVP are poles apart when it comes to risks and returns. While KVP offers guaranteed returns, there is no such guarantee in mutual funds.

Past data shows mutual funds have offered much higher returns than KVP. However, investing in mutual funds for the future would be subject to stock market risks. It will generate good returns if the market continues to perform. The opposite may also happen if the market doesn't do well. Therefore, one should invest in mutual funds only after fully understanding this risk.

Currently, KVP is offering 7.5% interest and doubles the invested amount in 9 years and 7 months. The interest rate or return from KVP is fixed throughout the tenure of the deposit. There is no fixed interest rate for mutual funds. Investors can only look at the past returns of a mutual fund, not the future returns.

Investing in KVP is straightforward. You can simply go to a post office and buy KVPs. But investing in mutual funds can be tricky. It may require help from a SEBI-approved financial advisor, especially if you do not know the fund in which you should invest.