A fixed deposit (FD) is a financial instrument provided by banks which provides investors with a higher rate of interest than a regular savings account, until the given maturity date. It may or may not require the creation of a separate account. It is known as a term deposit or time deposit in Canada, Australia, New Zealand, and the US, and as a bond in the United Kingdom and India. They are considered to be very safe investments. Wikipedia.
Fixed deposit investment is flexible and comes with fixed interest rate that varies from one bank to another depending on the banks desperation for funds. Your money can be invested for a period of 30, 60, 90, 120, 180 or 360 days or as requested by the customer and can be terminated before maturity (most banks may deduct a percentage of the interest earned upon premature termination of the investment).
Here are 6 periods when you should invest in fixed deposit.
When you have idle funds.
Whether you are in business or paid employment, there will always be a period when you have funds that you are not sure what to do with it yet. Then you should consider putting the money in fixed deposit. So your fund can earn you interest before you finally decide what to do with the money.
When you have built your emergency funds.
Emergency fund is the money your have painstakingly put away for rainy days. SEE: How To Build Your Savings. It is advised for new salary earners and small businesses to be able to take care of downtime in finances or bad business periods. Emergency funds can be put in long term fixed deposit account so the funds are not kept idle.
When you need to take advantage of short term interest gain before putting your money back in business.
There are period of wait in business, period when you are waiting for your supplier to ship before you make payments and the fund is right there in your account or when you have started making sales and your stock level is still high to order for new stocks. For manufacturers with good cash flow that is mopped up from collections and the time is not right to order for raw material yet. That is the period to take advantage of interest that the business can earn from fixed deposit investment.
When business or trade climate is not looking favorable and you need to tarry for a while before venturing back.
There may be period when item of sales or produce is not in season or economic issues does not permit investment in stocks or raw materials like period of high exchange rates. Then businesses should patronize fixed deposit investment to earn some interest income from their idle funds. Fixed Deposit investment makes your money works for your while you wait for economics business climate to improve.
When you need to earn steady income that will not deplete your principal
FDt investment provides you with investment that is steady and will not deplete your capital. Unlike investment in stocks and commodities with could make you worse off in a bad investment period. Fixed deposit will provide you with sure income while your principal is still intact. You are assured of stable return on your investment without unnecessary speculations and fear of market crash or bearish market returns.
When you need investment you can break anytime.
You can break your fixed deposit investment whenever you need money. Your bank may penalize you for breaking your investment before maturity but the penalty will only be on the interest you are to earn during the period, Your principal will not be affected. You may loose up to 20 percent of your interest if you decide to break your investment but your principal is still intact and you are also better off than leaving the money idle.
So go to your bank today for a Fixed Deposit investment and enjoy the benefit this banking product offers.