• Fixed Deposit Vs Term Deposit

    Investors today are smarter simply because of the information that is available in plenty and detail. Malaysia being one of the prominent economies in the South East region has several investment opportunities. However, it is sometimes extremely overwhelming for investors investors to deal with confusion and commotion in the knowledge base, that is in the Internet, which can be perceptive and complicate an investor’s decision instead of making it simpler. The investors might find it extremely perplexing to choose the apt investment options based on their requirements.

    There are several sorts of investments in the market based on risks and rewards. But understand that ,”There are no free lunches in life”. So nothing is a cake walk. All instruments have their own share of weaknesses and strengths. Also other investment requirement from are made with the aim to reduce taxability as well. So, it is essential to know what are the viable options for you.

    Personal Investment Instruments Prominent in Malaysia

    There are various financial instruments available in Malaysia for personal investment and can select based on their requirements which are as follows:

    1. Mutual Funds- This is an investment option that has high risks but is capable of making a very small invest amount and turn it into a larger amount. There are plenty of options, when it comes to mutual and plans based on risk-factors, rewards and time.
    2. Equity- This ownership capital based investment option depends highly on the respective stock market. The individual invests in equity is entitled to the respective percentage in the company. They are paid dividends and earn money when trading. It however, needs practice, expertise and understanding how the stock market behaves. The market might be unpredictable at times, again making this a high risk option.
    3. Gold: This is a safer investment option considering that the trading of gold generally is on the rising trend with the inflation being considered. However, in recent times, being 2013 to 2015, has seen several instances when gold prices have dropped affected by external market factors.
    4. Real Estate: This investment needs larger amount of capital but is affected by inflation, also being a safer option. But there are times that the reaction of the prices in respect to the market can be again unpredictable.
    5. Bonds: Bonds have lower risks. Individuals who wish for lowered risk but are alright with limited return can invest in bonds. Bonds are offered by both private and government bonds organizations as investments.
    6. Deposits: They are probably the most safe form of investment option. Term deposits and fixed deposits hence come into picture. But first it is essential to understand the different types of deposits available for investing in.

    This includes mainly two types:

    1. Time deposits: These deposits are subject to the time of the investments which is invested under this category. The individual will not be allowed to withdraw during the term and when the deposit reaches maturity he or she will be paid in full with interests.
    2. Demand deposits: This kind of deposits are paid on demand and have no restrictions on the time factor as well as can withdraw within a year based on the type of demand deposits they have invested in. Money is deposited in banks and post offices in a designated savings account and can be be withdrawn by cheques.

    How is fixed deposit and Term deposit different

    Both fixed and term deposits have the advantage of being fixed income and provide the investor a fixed return after a specified time period, which in some cases is post-maturity or by the end of the tenure of the deposit invested. In the end the time period, the investor is given the amount which would be the principal amount invested along with the added amount of interest which is accrued to him or her on such amounts of investment. There is a specified rate of interest by a bank but it varies on the bank also depending upon the type of deposits concerned.

    Banks sometimes offer high rate of interest for these two deposits, resulting the investment of the same increasing in the market.

    Both have the similar rate of tax and whatever the interest is earned during the given period. The same is added to the total income or amount of the assessee under the relevant head of income.

    However there are only a few differences for the two types of deposits:

    • In the case of fixed deposits, the bank deducts the income taxes in case the interest income in a year exceeds the prescribed limit. in the case of term deposits, no such deduction of , hence when it comes to choose the investment type, the investor chooses to spend his money in term deposits, as it would save the interest income of assessee from tax.
    • The earning rate, that is if the investor chooses carefully when choosing the type of deposit or plan might give higher rate of return. Hence, the investment in Fixed deposit gives more return to the investor in market as compared to the time deposit.

    So, in the end it's about how much you want to earn and whether you wish to withdraw from time to time or not.

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