A term deposit is a form of popular passive investments in which you put a fixed amount of cash to an institution over a fixed amount of period, or term. The term varies, ranging from a month to five years depending on the program.
Accordingly, a term deposit is highly secure, thanks to the fixed amount of term and interest. Moreover, under the agreements, it is unlikely that you will lose your money.
Basically, it works based on the interest rate that you earn each month. Put simply, the more money and the longer term you pick, the higher you will earn at the end of the day.
Despite everything, this form of investment also has its own disadvantages. Ergo, prior to making the investment, here are the pros and cons you need to know.
The Positives of Term Deposit
First things first, a term deposit is low risk and maintenance. Once you invest your money in, there is nothing you can do besides waiting for the withdrawal time. As the warrant promises you to get fixed income at a fixed term, there will be almost no possibility of losing the money.
Moreover, in making the investment, there is absolutely no additional fees for service or startup. This is, if and only if, you do not withdraw your money early before the withdrawal time.
Furthermore, any fluctuation in the market induces no effect to your deposit. In other words, you will still earn the same even if the market’s interest rates are skydiving.
The Negatives of Term Deposit
Regarding the fixed term and amount of cash, it brings inflexibility to your investment. Say you want to add more money or withdraw your money during the term, you will be unable to do so. Unless, you want to receive penalties.
Additionally, if you ever forget to withdraw your money at the time it is over, there will mostly be a rollback. Usually, what follows is a new period with a lower interest rate. The only way to get out of it is to make an early withdrawal, in which results in penalties.
Also, since any market progression bears no effect to your investment, you will get no benefits if interest rates increase. No extra bonus, no additional benefits.
Writer: Doddy D. Wahyuwono
