What are the advantages and disadvantages of fixed deposits?
solid deposits, like any investment, suit some investors and are wrong for others. They provide stability and guaranteed revenues. However, they also conclude funds, so it is a bad decision for investors who want to maintain flexibility in their portfolios.
The depositors must leave their funds for a specified period of time with a fixed deposit. The deposits accumulate the interest rate. The rates are higher, the longer the required deposit length, as longer -term deposits allow the bank to greater flexibility in the investments it carries out. The bank borrows funds from deposits for investment. If it is guaranteed that the depositor will not withdraw funds for a certain period of time, it can participate in long -term lucrative investments without worrying about unexpected selections to force them to be inability. If you invest in stocks, it can reduce value, so you are joking the initial money you have invested. Repaired deposits protect against it; You always get backPlus guaranteed interest rate. Fixed deposits are also an asset against which investors can borrow. Finally, there are usually very low investment requirements for fixed deposits. Even a small initial deposit can begin to increase interest.
However, solid bearings have disadvantages. Depositors cannot withdraw funds during the fixed period, so they have no access to these money in an emergency. Although it is possible to borrow against an account with a fixed deposit, they are forced to pay interest for using funds that they could easily download from another account. Unlike some other investment classes, fixed deposits carry any tax protection and interest is taxed because it is in the account. Inflation risk is also concerned because high inflation with decreased deposit yields; In this environment, the investor would be better to buy a tool protected by inflation.Interest risk is the main forBlem holders of fixed deposits. This risk is a factor that can be a professional or KON -V dependence on the investment climate at the time the deposit is made. The investment risk is the uncertainty of future interest rates; They could go up or down, depending on different economic conditions. Fixed deposits lock the interest rate, which is determined by current market conditions. If the interest rate is expected to drop, a good idea may be a solid deposit, but if the interest rate increases, a solid deposit may be unprofitable.