Fixed deposits – high security investment
If you want to invest your money over a longer period of time without having to access it, a fixed deposit might be the right choice for you. As instant access savings accounts, a fixed deposit offers relatively high interest rates as well as a high level of security as there is no speculative factor which exists in other forms of investment, such as stock trading.
Unlike the instant access savings account, fixed deposits have a fixed duration. During this time, you cannot access your money. Thus, you should be able to survive without the invested amount of money for a longer period of time when deciding to go with a fixed deposit.
The duration of a fixed deposit can range from a couple of months up to several years. Further, you need to be aware that some banks require you to invest a certain minimum amount.
Interest rates for fixed deposits are often relatively high – mostly even higher than for an instant access savings account. This has to do with the exact calculability that is not given when opening an instant access savings account as the interest rates can be adjusted at any time.
As the interest rate for a fixed deposit cannot be changed, the investor can calculate his profit very exactly. Further, with a fixed deposit you are safe against interest rate fluctuations. However, this also means that you will not profit from a positive development of the financial market, either.
Generally, it can be said that the height of the interest rate is linked to the duration of the contract. The longer you invest your money into a fixed deposit, the higher your interest rates will be. This is why you can expect a higher interest rate than for an instant access savings account, even if you only invest your money for a relatively short time.