When the average person thinks of investing their money, they think of investments such as the Forex market and the stock exchange. What many people do not know is that there are a few different ways in which they can invest their money without risking losing it all on one trade. One of these investment options is the fixed term deposit.
What is a fixed term deposit?
A fixed term deposit account is an account in which an investor places a sum of money in for a "fixed term". This term is agreed on between the customer and the bank providing the account. If the customer does not withdraw the money before the specified time, they will be rewarded with interest at the end of the term. If they withdraw the money before the term is up, the customer will generally forfeit the interest that has been earned on this account. Minimum amount required Fixed term deposits are mostly set up by banks and finance companies. Most companies will require that the investor puts in at least $5,000 into their account in order to qualify for this service.
The benefits and drawbacks of getting a fixed term deposit
The benefits of getting a fixed term deposit account The biggest benefit of keeping money into this type of account is that there is very little risk involved. People who take out a fixed term deposit with a bank will find that they will always get their money back at the end of the term. This is because most banks have been around a very long term and are unlikely to go bankrupt. Even if this unlikely situation were to occur, the customers of banks are protected by insurance. Fixed deposits are an excellent option for investors who want to earn some money without risking their initial investment amount. The drawbacks of fixed term deposits As this investment product is a low-risk investment, it will give the investor low returns. Generally, when it comes to investing money, higher risk investments produce high returns . However, high risk options such as Forex can also lead to the investor losing all of their initial investment. Due to this fixed rate, deposits are good for people who are just getting started in the world of investments.