Fixed Deposits: Yes or No

Love ’em or hate ’em, the investment world just can’t go on without them.

By definition: fixed deposits are a low risk investment that guarantee your investment and gives stable returns. In two words: enforced savings.

Typically, you put in a huge chunk of your savings in a financial institution and they’ll allow you to redeem the amount + interest earned after a fixed time period.

While every investment carries risk, fixed deposits are the low risk, low returns haven that most would allocate a portion of their portfolio to, buffering the impacts of unfavourable, volatile, price changes of more high risk, high returns investments .

In Singapore, the government has launched the Singapore Savings Bonds as a fail-proof method for the man on the street to grow his money for the long-run. Personally, I do love how you only need a minimum of $500 to get started, interest is paid out every 6 months AND total investment + pro-rated interest can be redeemed monthly, with a max of 10 years.

Screen Shot 2017-07-10 at 10.17.20 pm

Source: Singapore Savings Bonds

Banks also regularly offer their own Fixed Deposit promotions e.g. UOB’s recent Singapore Dollar 10 Months Fixed Deposit Promotion of 1.10% [expired] to attract and lock-in investors’ funds for a fixed time period. Unfortunately, these typically require larger investment sums e.g. minimum $1000 or $25,000, depending on which bank and their various promotions and a longer ‘lock-up’ period of funds before redemption.

However, interest rates are typically higher due to the increased funds required and decreased liquidity of investments.

My personal take?

Depending on your fiscal discipline and lifestyle, either option can be considered as both are relatively ‘safe’ investments to enforce your savings over time, and can pay out more interest than most savings accounts, which at the minimum averages at 0.25% and at most require meeting multiple conditions to achieve interest rates of 3% and above.

At the point of writing, I also keenly look forward to the redemption of one of my fixed deposits which, after two years, will finally come to fruition after a patient wait.

Thankfully, even with epic life milestones within the past year of getting married, going on a honeymoon and buying a house, I have not had to cash out my fixed deposits prematurely, allowing the sum to gently accumulate 1.75% interest over the years.

As they say, good things come to those who wait ❤

I can’t help but hope better things come to those who know how to manage their funds better. Still, it’s been a learning experience and I’m glad the bank has stayed solvent 🙂

What do you think of fixed deposits?

Live long and prosper,

Lynn

 

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