Investing in Fixed Deposit

Fixed Deposits or some refers as termed deposits or time deposits basically pay you a higher interest rate over a fixed period of time without withdrawing it. Fixed Deposit is a common investment option for many people due to its higher return and lowest risk. Also, it requires no specific investment skills or knowledge. The only knowledge you need to know if which commercial banks offer you the highest rate in Fixed Deposit.

Understanding Fixed Deposit Rate

Most banks nowadays offer FD rate of 3.20% per annum for 1 month placement, and higher rate for longer placement period, like 6 months or 12 months. An initial investment of RM5,000 at 3.20% for a 1 month placement would earn you RM13.33 per month (3.2% divide by 12 x RM5,000). If you opt for 6 month placement, you will get a higher rate at 3.35%, thus earning you RM83.75 after 6 month period. So, the longer you “lock in” the period, the higher interest you will get.

Advantage of Fixed Deposit

One of the advantages of Fixed Deposit is risk-free.  You need not worry about losing your money as your deposit is safeguarded. Even in the unlike event of the commercial bank being bankrupt, your Fixed Deposit is protected by Perbadanan Insurans Deposit Malaysia) PIDM, which is a Government agency established to protect you against loss of your deposits placed with Malaysian Banks.

Another advantage is the higher rate compared to regular saving interest rate. If you are leaving your money idle in the saving account, you should consider putting them to a fixed deposit.

Liquidity is also one of the advantages of investing in Fixed Deposit. Unlike other investment like stocks, unit share, which you may need a few days to cash out. Fixed Deposit can be cash out anytime upon you presenting yourself to the bank. Thus, if you have excess funds, and you do not intend to use it for any specific purposes, you should put them into Fixed Deposit.

Disadvantage of Fixed Deposit

Although we said Fixed Deposit offer higher interest rate, it is compared to regular saving interest rate.  If compared to any other investment option, Fixed Deposit is one of the lowest return investments.  The basic rule of thumb, high return comes with high risk. Fixed Deposit offers low return but it comes with lowest risk.

Nevertheless, fixed deposit is still a recommended short term investment option that you should consider.  To maximise your return, check out which banks offer you the highest Fixed Deposit rate at exchangerate.my