With Diwali and the festive season approaching, many employees may receive a festive bonus from their employers. If you are expecting an additional ₹5,000, ₹10,000, or more, deciding in advance where to invest this money can help you make the most of it rather than spend it impulsively.
However, with returns varying across asset classes in 2026, choosing the right investment option among , gold, and fixed deposits () requires looking beyond recent performance. Here’s what you need to know.
How are the returns of mutual funds, gold, and FDs?
These tables show how equity mutual fund categories and /funds have performed year-to-date in 2026 and over three years.
| Equity Mutual funds and gold | YTD returns (%) | 3-year returns (%) |
| Large-cap funds | -10.04 | +8.37 |
| Mid-cap funds | -1.70 | +12.95 |
| Small-cap funds | +8.44 | +13.29 |
| Flexi-cap funds | -4.62 | +9.34 |
| Gold ETFs/funds | +11.33 | +36.85 |
*Source: Value Research, Category Average Returns as on 8 October 2026
Here are the highest FD interest rates and rates offered by select banks for one-, three-, and five-year deposits.
| Bank | Highest FD rate | 1-year FD | 3-year FD | 5-year FD |
| HDFC Bank | 6.50% | 6.25% | 6.45% | 6.40% |
| ICICI Bank | 6.50% | 6.25% | 6.45% | 6.50% |
| State Bank of India | 6.45% | 6.25% | 6.30% | 6.05% |
| Kotak Mahindra Bank | 6.65% | 6.50% | 6.40% | 6.25% |
| Axis Bank | 6.50% | 6.25% | 6.50% | 6.50% |
*Source: paisabazaar, Only top 5 banks considered, FD Rates as on 7 October 2026, Actual rates can vary
Which option to pick to invest the festive bonus?
Uttam Agarwal, Chief Business Officer at Bajaj Capital LAP, said investors with a five-year or longer investment horizon could consider mutual funds. However, those concerned about market volatility need not invest their entire bonus at once. Spread it over three to six months through an SIP or STP.
“Fixed deposits still make sense for money you’ll need soon, and with the RBI’s recent repo rate hike, it’s worth watching whether banks raise their rates,” Agarwal added.
Manish P. Hingar, Chartered Accountant, Founder and Chief Executive Officer of Fintoo, recommended diversification rather than putting the entire bonus into one investment option in the current volatile market environment.
He suggested a portfolio allocation of 60% to mutual funds, 10% to gold, and 30% to fixed deposits. Mutual funds can support long-term wealth creation, gold can help hedge against market uncertainty and inflation, while FDs provide stability and predictable returns. However, the ideal allocation should depend on an investor’s risk appetite, existing portfolio and investment horizon.
Harsh Vardhan Dawar, ACA, CFA, FRM, Founder – Wealth Cafe, said investors whose equity allocation has fallen below their portfolio target following the market decline could consider investing in equity mutual funds.
Which mutual fund category should you consider?
Dawar said large-cap funds offer the best risk-reward ratio based on current market valuations across market capitalisations.
However, Agarwal suggested considering hybrid funds, particularly balanced advantage and multi-asset allocation funds, given the unpredictable market environment.
Balanced advantage funds dynamically adjust their equity and debt exposure as market conditions change. Multi-asset allocation funds invest across at least three asset classes, with a minimum allocation of 10% to each, potentially providing exposure to equity, debt and gold within a single fund, he added.
Hingar also said multi-asset allocation mutual funds could be considered in the current market environment.
For investors exploring debt funds, Dawar suggested floating-rate debt funds for those who cannot actively track changes in interest rates every quarter.
What investment horizon to consider for each asset class?
Agarwal said for equity and hybrid funds, think five years or more, because that gives markets time to recover from rough patches. Gold ETFs work best as a diversifier over three to five years. Don’t expect steady returns, since gold moves in long cycles.
“Fixed deposits suit goals with a known date, like a school fee or a down payment. Match the tenure to that date. With rates recently moving up, you may not want to lock in very long tenures straight away. Also remember that taxes and inflation reduce what an FD really earns,” Agarwal added.
Before investing the festive bonus, Hingar suggested assessing high-interest debt, ensuring emergency savings are adequate and reviewing insurance needs.
“The key is to assign the bonus a clear financial purpose rather than chase the asset class that has delivered the highest recent returns. A disciplined allocation based on individual goals, risk tolerance and investment horizon can help investors put their festive bonus to better use,” Hingar added.