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Comparing Term Deposits as an investment

As you might have guessed, a term deposit is a deposit held with a financial institution for a fixed term. They are an increasingly common method of saving money by investing it at a low risk for a set amount of time.

Currently, with people who have made probably more rewarding investments only to see a disheartening outcome, it is becoming a very common approach to stow away cash where it cannot be touched for a period. If you have a lump sum and want to invest it, you could put it into a hedge fund and watch as the roller coaster takes the value of your money up and down at the mercy of the markets, often taking your sanity with it. A much easier and secure that guarantees profits is to put it in a term deposit account.

When stock and real estate markets are flourishing, many people rightly would rather invest their money into something more rewarding, as opposed to a term desposit. However, it is clear to anyone who has an eye on today’s uncertain economies that a term deposit is a very logical investment at the moment. By removing your money from commission for a period of time, you are of course hurting your immediate bottom line. However, the fact that you have put it away for that period of time, without any demand attached to its return, qualifies you for a definite profit – often a higher earning than a basic savings account.

Choosing between a savings account and a term deposit is a simply a question of: do you most favour flexibility, or do you feel it is worth waiting for a better return? Answering this will depend on a simple question: can you afford to put this money out of reach for a spell? If you believe the answer is “yes” then you are the ideal candidate for a term deposit. If you compare term deposits
to savings accounts then you will realise that the profit rewards you for sitting tight and trusting that your investment was the most suitable one.

But, if having fluid assets is a necessity, it does not help you to have amounts tied up in term deposits. You can technically withdraw some money from a term deposit before term’s expiry period, but you will forfeit at least a percentage of the interest earned, and in some cases, some of the money you actually put away. Term deposits are not for the faint-hearted saver who worries that their money is out of commission for a spell. However, if you possibly need the money back in twe months, or a year’s time, it would be a good idea to put it in a term deposit, and enjoy the additional money that your patience has earned you.

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