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Fixed term Investment

The fixed term deposit refers to the practice of saving money for a certain extent of time at a fixed interest rate. The aspect of safety of a fixed term investment (there are no fluctuations in the interest rate as per the market) has made it very popular among investors who want to make some concrete saving for the future. There is always the feeling of containment in knowing that you have a fixed deposit locked away to meet your future expenses, especially those after the retirement. You also control the term for which you want to set aside your money and the amount of money that you would like to save. The guarantee of returns from fixed term deposits also contributes to its popularity among investors. There are different kinds of fixed term deposits. They are as follows.

  • Term deposits, which are the commonest kinds of fixed investment
  • The debentures
  • The bonds, and
  •  The accounts of cash management trusts

Also, depending on the duration for which you want to set aside your money, there are two kinds of fixed deposits. They are the short term deposits and the long term deposits. An investor may choose to save money in both short term and long term simultaneously. Short term deposits are often considered as dress rehearsals for long term deposits. You save money in short fixed terms, ranging from a few months to one year, see how it goes and eventually decide on the long term deposits, than can extend up to seven years or even more. Different banks have different regulations for term deposits and you must be aware of these regulations before you choose the bank where you would be making the deposit. When a fixed deposit reaches maturation, it is up to you to decide whether you want to withdraw the money or you would like to see the money in another subsequent fixed term deposit. Since a fixed term investment is a much safer method of saving and seeing your money grow to a substantial amount than other methods of investment like shares and mutual funds, they are greatly popular among new investors who want to save their money for the future.

However, you should remember that when you are investing money in fixed term, you are committed towards not withdrawing the money, except of course dire financial emergencies. You may have to pay penalties for withdrawing your fixed deposit and that is definitely something that you do not want to happen. You can of course adopt the strategy of making short term fixed deposits for a few months and when the term expires, you withdraw the money and invest it in a new fixed deposit scheme or in anywhere else according to your financial plan. Short term deposits come with the benefit of having ready money at hand after a few months, so you should make full use of that opportunity. Another suggestion is to partition your savings into sections. A part of savings you keep locked up and the other part you invest in a financial plan which allows you ready access to your money without facing the burden of heavy penalties.

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