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What is the difference between a deposit and an investment fund?

Many people who are looking to invest their money are sometimes confused about the difference between a deposit and an investment fund.

While term and demand deposits have traditionally been the most common vehicle if you want to grow your money, recent years have seen investment funds become more and more popular.

These are the main differences between a deposit and an investment fund:

Nature of the product

This is the main difference to take into account. When you take out a deposit, you are effectively loaning your money to the bank on the understanding that it will be returned to you on the date stipulated in the agreement along with the agreed profit.

With investment funds, the fund manager moves your money as stipulated in the agreement but the bank doesn't include it on its balance sheet because you as the investor are the unit holder.

Liquidity period

Another unique feature is the term in which you can access your money again.

In the case of term deposits, if you want to withdraw your money before the date stipulated in the agreement, you will probably have to pay a penalty.

In the case of investment funds (with the exception of certain guaranteed funds), you can withdraw your investment at any time because funds offer daily liquidity and therefore more flexibility.


In the case of funds, you can also transfer money from one to another without having to pay any tax until you redeem your investment. Besides, when you declare it on your tax return, you can offset it with losses and gains from other investments.


The economic developments of recent decades and the fall in interest rates have had a knock-on effect on the yields from deposits, with the result that the profit earned is sometimes negligible.

Unlike deposits, investment funds don't yield a guaranteed return but fluctuate with the market, so their performance varies from one day to another according to the profile and the portfolio in question.


It's important to bear in mind that deposits have a coverage of 100,000 euros in the event of bankruptcy by the financial institution, backed by the Deposit Guarantee Fund.

Investment funds don't have this coverage and since they invest in different assets, the losses can be greater and will also depend on the holdings.


While deposits offer little variety beyond the term and return, in the case of investment funds there are numerous criteria to take into account when choosing one or another.

Bankinter offers multiple options for savers looking to grow their money, whether through deposits or investment funds.



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Investment funds dictionary

Our glossary provides detailed information about investment funds.
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