Best Fixed Deposit Accounts To Invest In

Best fixed deposit accounts to invest in

Best fixed deposit accounts to invest in

Fixed Deposits or Time Deposits are fixed interest savings products offered by almost all banks in Malaysia. We’ve tried to put together a few tips to help you select and invest in the best fixed deposits available, appropriate for your needs:

Understand your needs – Try understanding your exact needs/requirements through the following questions:

What is your investable corpus? This is the amount that you can set aside.

What is your investable tenor? This is the period for which you invest in an FD.

What is your risk profile? Are you willing to invest in market-linked Fds? Or do you want a safe, guaranteed-return FD.

A fixed deposit involves depositing a sum of money for a fixed period of time ranging from a month to a few years. Premature withdrawals (before end of tenor) could potentially lose you all the interest earned as well as making you liable to pay a penalty (depending upon the product’s terms and conditions). So, check whether you can (i) set aside an investable corpus and (ii) for the given time period.

Zero in on the product of your choice – Though many people consider returns to be the sole factor on which to rate fixed deposits, your particular requirements may vary. Criteria like minimum deposit requirements, minimum/maximum deposit tenor, level of customer service provided at the deposit taking bank/financial institution, flexibility to make partial withdrawals, availability of overdraft against fixed deposits, automatic renewal of deposits upon maturity, auto-credit of interest earned to your CA/SA etc could impact your decision to go with a particular deposit product.

Consider alternative avenues – Fixed Deposits come in several flavours. In addition to the “conventional” deposit products there are other deposit products like Foreign Currency Fixed Deposits, Islamic Deposits and Cooperative bank deposits.

Foreign Currency Deposits have become popular as they tend to provide higher returns than conventional deposits but are subject to exchange risk. They are also popular with those who have foreign currency earnings, wish to invest overseas, have business interests outside Malaysia and/or wish to educate their children overseas.

Islamic deposits are Shariah-compliant products tool that provide “Halal” returns. Mudharabah, Murabahah and Wakalah are the main types of fixed deposit options available under Islamic Banking. The customer deposits his money with the bank for a fixed duration. The bank will invest the monies so deposited in Shariah-compliant ventures and the proceeds are divided, between the investor and the bank in it’s capacity as a manager, at a pre-agreed ratio.

Fixed deposits with cooperative banks have tended to provide high returns with comparatively low minimum deposit requirements. However, unlike conventional or Islamic FDs, they are not eligible for PIDM protection; you will, however, get protection from the Ministry of Finance under the Development of Financial Institutions Act (DAFIA).

If you are interested in high interest rates with conventional deposits consider Kids Deposits, Seniors’ Deposits and deposits accompanied by promotions.

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Best Tips For Investing In Fixed Deposits

Best tips for investing in Fixed Deposits

Best tips for investing in Fixed Deposits

Fixed Deposits (FD) or Time Deposits are accounts that offer a fixed, guaranteed rate of interest for a fixed time period. Fixed Deposits have remained very popular amongst Malaysians despite the emergence of several, new investment products. Here are a few tips for making the best of your fixed deposit investments:

Understand the types of Fixed Deposits on offer – The following types of fixed deposits are offered in Malaysia: conventional, guaranteed-return Fixed Deposits, Islamic Fixed Deposits and Foreign Currency Fixed Deposits for the investor who is prepared to risk exchange rate fluctuations for higher returns. Understand the nature of each of these deposit categories and use them appropriate to your investment goals.

PIDM protection – Ensure that your Fixed Deposit investment is eligible for PIDM protection. This protection extends to all types of bank fixed deposits up to a limit of RM250,000 per depositer per member bank. If your investable corpus is more than this amount, you can still get PIDM protection for the entire sum by breaking up the sum under different accounts like joint accounts with your mother, father or spouse. Under PIDM rules such joint accounts are also eligible for separate protection up to RM 250,000 each provided that each of the joint accounts has a different set of account holders.

FD Promotions – One way of enjoying higher interest rates on your FDs is by investing through promotions. Even if you don’t get higher-than-standard interest rates you could get “value-for-money” gifts.

Kids / Senior Accounts – Kids and Seniors’ accounts generally tend to give slightly higher rates of interest on FDs. So, try and park your money in your child or parent’s name especially if it is a substantial sum and you wish to invest it for a longish period of time. The extra interest earned is not to be sneezed at.

Cooperative Bank Deposits – These provide some of the best FD interest returns available in the market. For example, a one month (minimum RM 1,000) deposit with MBSB provides 3.3% returns; the Bank Rakyat Deposits Account-i provides a return of 3.6% for a 3-month deposit with a minimum deposit of just RM 500.

The drawback is, these deposits are not eligible for PIDM protection; you will, however, get protection from the Ministry of Finance under the Development of Financial Institutions Act (DAFIA).

Very short tenors – If you are foreign exchange-savvy use Foreign Currency Fixed Deposits as they offer very short-range tenors ranging from overnight to a week or a couple of weeks. Conventional deposits are only available one month onwards.

Partial Withdrawals – Most banks levy a penalty fee on premature withdrawals and you may even lose the interest accrued. But what are you to do if you require emergency cash? Check for an FD that permits partial withdrawals.

Overdraft Facility – Another way of accessing emergency cash is through an overdraft collateralized against your FD.

Automatic deposit renewal – Wouldn’t it be nice if your FD gets automatically renewed upon maturity? Or, the profit/interest is credited to your savings or current account while the principal gets renewed. Check for an FD that allows you to “program” what happens on its maturity.

The Citibank Time Deposit allows you to make partial withdrawals in multiples of RM5,000 while the remaining balance continues to earn the original rate of interest. You also have the option of pledging your Time Deposit for an overdraft facility. And, by default, your deposit together with the interest earned is automatically renewed.

Make An Investment Plan For Your Post-Retirement

Make an Investment Plan for your post-retirement

Make an Investment Plan for your post-retirement

A well-planned retirement is key to an active, happy life during the post-retirement years. However, various studies and surveys have a disturbing message: many Malaysians are not planning / saving enough to fund their post-retirement life. Compounding this, many Malaysians believe that either the government or their children will take care of them.

But with the government rolling back competition-constricting subsidies and the rising cost of living making it difficult for even the most filial of children to look after their parents in comfort, retirement planning has assumed increased importance. Let’s take a look at a few pointers that could help you plan for your retirement:

How much would you need?

Financial experts use a rule-of-thumb figure of 80% to compute the income required post-retirement. 80% represents the percentage of current income you may require. This could vary upwards or even downwards (but don’t bet on it!).

Factor in inflation

One crucial mistake that many people make is that they fail to figure in inflation. Rising inflation can make major inroads into your post-retirement income; you could very easily find yourself without sufficient income to meet all your needs after your retirement. It is also important for you to factor in the increased life expectancy of Malaysians and a possible increase in care costs for the elderly.

How long do you have?

Deduct your current age from the age when you expect to retire. This is the time period you have to build up your retirement corpus.

Calculate your retirement requirement

Use the formula M = P (1+I)n to calculate your annual expenditure after retirement. Here P stands for 80% (going by the rule-of-thumb figure discussed above) of your current annual income, I for the inflation rate and n stands for the time period in years discissed above.

Building up your corpus

Now that you’ve determined the amount that you would need after retirement it is time to plan and build a corpus that will generate the computed income for you. Here is how you could go about it:

Start early – One of the best ways of building up a good retirement corpus is by starting to save early, preferably when you are in your early 20s and have started working. An early start will enable you to save more, to harness the power of compounding and to take a few well-calculated risks with higher return possibilities to help you build a bigger corpus.

Use a diversified portfolio – Build a well-diversified investment portfolio that includes not just fixed deposits but also bonds, REITs, Unit Trusts, equities, ETFs, gold-related investments, annuities, property etc.

Such a portfolio will keep your investments growing at a reasonable rate while also mitigating risks of one asset class falling due to a crash in it’s market. Also, make sure that you understand the tax implications of your various asset holdings. You should also be sufficiently covered through life, health, vehicle, property and other insurance.

Make use of savings schemes – Both the EPF (Employees’ Provident Fund) and the newer, voluntary PRS (Private Retirement Scheme) are great for helping you build a retirement corpus in a disciplined manner while offering tax advantages.

Consult a financial advisor – Understanding the various asset classes while putting together a structured investment plan in tune with your needs is not an easy task. An experienced, well-qualified financial advisor can help you put together a good investment plan given your current life and financial realities.

Just make sure that your advisor is a Registered Financial Planner (RFP) as conferred by the Malaysian Financial Planning Council (MFPC) and that the advisory organization he is with is appropriately licensed under the Insurance Act and the Insurance Regulations as per the 2005 amendment.

Compare Fixed Deposit Rates In Malaysia

Compare fixed deposit rates in Malaysia

Compare fixed deposit rates in Malaysia

Fixed Deposits (FD) or Time Deposits are accounts that offer a fixed, guaranteed rate of interest for a fixed time period. Fixed deposits, in general, offer much more attractive rates of interest than standard savings accounts and have hence enjoyed immense popularity with generations of Malaysians.

We will try and look at a few of the best fixed deposit accounts in Malaysia from an interest-paying perspective. But before we do that, it is important to bear in mind that there a lot more variables that affect the attractiveness of the high-interest paying fixed deposit. These could include tenor, minimum deposit amount, availability of overdraft against the fixed deposit, requirement to have a CA/SA with the bank, availability of partial withdrawals, daily or monthly interest calculation, penalties and charges applicable in case of premature withdrawal etc.

Rates may also differ for foreign currency deposits and for deposits made by senior citizens (we will not look at these deposit types in this article). Moreover, different banks keep coming up with fixed deposit promotions. You can generally get higher rates of interest through such promotions than is normally possible. But still, it is important that you check the terms and conditions of such promotions before you open an FD through these promotions.

Now is a pretty good time to invest in fixed deposits as their rates have been going up since Bank Negara raised the overnight policy rate (OPR) by 25 basis points on July 14, 2014. Ok, here is the promised selection:

Hong Leong Bank FD Promotions – You will be offered 4% p.a. for a 15 month deposit and 3.85% p.a. for a 12 month deposit. The promotional period runs from 01st July 2014 to 31st October 2014. Minimum deposit amount is RM 10,000 but you will also be required to open a Current or Savings Account with a minimum deposit of RM 1,000. 10% of the FD placement will be earmarked in the CA/SA for a period of 6 months. You will also have a shot at winning the grand prize of a corner terrace home at Emerald Rawang, Selangor.

Alliance FD Gold – This FD provides an interest rate of 3.4% for tenors ranging from 12 to 24 months with negotiable rates for higher tenors. The minimum deposit amount is RM 30,000. Interest is credited into an account of your choice monthly. You can also make partial withdrawals in multiples of RM 1,000 subject to a minimum balance maintenance of RM30,000. An overdraft facility on a 1:1 basis is also available against the Alliance FD Gold placement amount.

Citibank Time Deposit – Interest rate ranges from 2.95% over a tenor of 1/2 months to 3.10% for a tenor of 6-8 months to 3.2% for 12 months – all of which is pretty standard. You can, however, make partial withdrawals in multiples of RM5,000 while the remaining balance continues to earn the original rate of interest. You also have the option of pledging your Time Deposit for an overdraft facility. Minimum deposit – for 1 month, RM 5,000 and for 2 to 60 months, RM 1,000.

Cooperative bank deposits – You can also get excellent rates from the following banks:

1 month tenor – 3.3% with MBSB with a minimum deposit of RM 1,000.

Bank Rakyat Deposits Account-i – 3 month tenor – 3.6% with a minimum deposit of just RM 500. This deposit account also provides interest rates of 3.65% for 6 months, 3.75% for 9 months, 3.9% for 12 months, 4.4% for 60 months and 4.5% for tenors more than 60 months.

Cooperative bank deposits are not eligible for PIDM protection; you will, howver, get protection from the Ministry of Finance under the Development of Financial Institutions Act (DAFIA).

Uses Of Investing In Fixed Deposits

Uses of investing in fixed deposits

Uses of investing in fixed deposits

A fixed deposit or a term deposit or a time deposit is a financial product provided by banks that has a fixed term. A fixed deposit pays a fixed rate of interest, that is generally better than a regular savings account, until the end of the maturity term. Interest rates can vary depending upon a number of factors; these include the monetary policy of Bank Negara Malaysia, the policies of the bank issuing the deposit certificate, the amount of money invested, the term invested, age of the depositor (some deposits provide a higher rate of interest for senior citizens and for kids (“Juniors”)) etc.

In Malaysia, there are various types of fixed deposit products available; these include Conventional Fixed Deposits, Foreign Currency Fixed Deposits and Islamic Fixed Deposits. We will try and explore the uses of investing in fixed deposits:

* Fixed deposits are attractive to Malaysians as they offer a higher rate of interest than savings accounts. In addition, priority or premier banking customers may get higher rates of interest on their fixed deposits.

* Conventional fixed deposits not only provide returns guaranteed from interest rate fluctuations but also guarantee the prinicipal amount.

* Some banks even offer the flexibility of partial withdrawals before the maturity date. For instance, Citibank’s Time Deposits offer you the flexibility of making partial withdrawals in multiples of RM5,000 while the balance amount will continue to earn interest.

* Foreign Currency Deposits have become popular as they tend to provide higher returns than conventional deposits and in foreign currency but are subject to exchange risk. They are also popular with those who have foreign currency earnings, wish to invest overseas, have business interests outside Malaysia and/or wish to educate their children overseas.

* Foreign Currency Deposits also serve as a hedging tool.

* Fixed deposits can be used as a collateral for availing of overdraft facility.

* Islamic deposits provide a Shariah-compliant financial tool that provides “Halal” returns for customers who are so inclined.

* Persons in their individual and joint capacity as well as businesses, associations, clubs, trusts etc can open Fixed Deposit Accounts.

* Some banks automatically renew a deposit upon maturity; you can also choose to have the profit / interest earned credited to your savings or current account. Alternatively, you may choose to have the entire amount of the fixed deposit (both the principal and interest) credited to your savings or current account. In such a case, your fixed deposit will cease to exist.

* All types of bank fixed deposits including Islamic fixed deposits are eligible for PIDM protection upto a limit of RM250,000 per depositor per member bank.

* To ensure PIDM protection for a larger sum of money (larger than RM 250,000) than is available for a single depositor (you) is by opening joint accounts with your mother, father or spouse. Under PIDM rules such joint accounts are eligible for separate protection up to RM 250,000 each provided that each of the joint accounts has a different set of account holders.

* Many banks keep coming up with FD promotions; stay alert for such promotions as you may end up with higher interest rates than normal or with gifts that are “value-for-money”.

Why Do We Need To Invest In Gold

investing in gold

Why do we need to invest in Gold

Gold as an asset class

Historically, gold as an asset has always been in a class of its own. Its bright yellow colour made it attractive to look at; its high ductility and malleability enabled it to be worked upon in myriad ways; it is stable and has high resistance to corrosion (it can resist attacks by many acids) and most other chemical reactions; all these factors made it the metal of choice for fashioning jewellery across cultures across ages. With the coming of the Industrial Revolution, gold’s property as an excellent conductor of electricity made it an even more valuable.

In economic terms, gold has, from early times, been used as a store of value. It thus fulfilled the value of money especially given the highly volatile nature of non-gold currencies. This is also why it has been used as a hedge against inflation.

There are other reasons for gold’s attractiveness as an investment: gold prices are available for more than a hundred and fifty years enabling far deeper study by investors. Gold’s lack of correlation to other asset classes like stocks and bonds means that gold can be used effectively to diversify portfolios. In general, many financial consultants recommend keeping 4-12 percent of a portfolio in the form of gold. And, in recent times gold has become far more accessible thus enhancing its investibility.

Gold investment avenues in Malaysia

Malaysians can invest in either physical gold or “paper” gold.

Physical Gold

Physical Gold investments can be made by buying gold jewellery, gold coins, gold wafers and gold bars from jewellers. Gold jewellery incurs workmanship charges while the purity of coins or bars vary from jeweller to jeweller.

Investments in gold can also be by means of the Kijang Emas or the Kelantan Gold Dinar. Kijang Emas are the Malaysian Gold Bullion coins issued by the Bank Negara Malaysia. Kelantan Gold Dinars are being issued by the Kelantan State Government since 2006. One Dinar refers to a gold coin of 4.54 grams and has a composition of 22 carat gold (916 purity). The Dinars are available in 1, 1/2 and 1/4 Dinars. The advantage of investing in these gold bullion coins is that you are assured of the purity and composition of the gold that you are holding.

Investing in physical gold carries with it storage costs and the risk of loss due to theft, robbery etc.

Paper Gold – Gold Investment Accounts

Malaysians can also invest in gold through Gold Investment Accounts. Some banks in Malaysia allow anyone to open such an account; the account balance is measured in grams of gold rather than in terms of a currency. This allows an investor to make deposits when prices are favourable and withdraw funds at a profit, when prices rise. The investor can even opt to receive physical gold instead of cash when they withdraw funds.

Islamic Gold Investment Accounts are also available. These accounts are Shariah-compliant and are based on the principles of Bai’ As-Sarf & Qardh.

Overdraft against Fixed Deposits

What is a Fixed Deposit?

A Fixed Deposit is a type of account that offers a fixed and guaranteed rate of interest on your savings or investment. They are either termed as Fixed Deposit accounts or as Time Deposits. Such accounts are offered by almost all banks in Malaysia.

Fixed Deposits offer significantly higher rates of interest than savings accounts while minimizing the risk associated with other high-risk investment products; this accounts for their popularity with Malaysians even today.

What is an Overdraft?

An Overdraft is a credit facility allowed to bank customers to draw more than what is in their account(s) up to the credit limit allowed by the financial institution. Overdrafts are available both in the form of unsecured (without collateral) and secured Overdrafts. Secured Overdrafts allow for favourable interest rates for the borrowers.

Overdraft against Fixed Deposits (O-FD)

OverDraft Against Fixed DepositsAn Overdraft against a Fixed Deposit is a type of a secured overdraft. Here the Overdraft is secured against the Fixed Deposit, i.e., the amount in the Fixed Deposit provides the bank with the security for releasing credit to the customer in the form of the Overdraft.

Benefits

* In most cases a secured Overdraft like an Overdraft against a Fixed Deposit provides the borrower with a more favourable rate of interest than in the case of an unsecured Overdraft.

* The borrower can access emergency cash without having to break the Fixed Deposit.

* The Fixed Deposit continues to earn interest. This can be offset against the interest charges on the Overdraft.

* Most O-FD products like Citibank’s “Overdraft against Time Deposit” charge interest only if the funds are used.

Islamic versions of the Overdraft against Fixed Deposit products are also available. These could be based on the Islamic principle of Wakalah (or Agency).

Points to note

* In accordance with the Rules of Association of Banks in Malaysia, most banks (some products do not carry this fee) levy a commitment fee of up to 1% on the un-utilised portion of the approved overdraft limit in excess of RM250,000.

* Once an Overdraft is availed against the Fixed Deposit, check whether Fixed Deposit interest earnings are based on the entire amount in the Fixed Deposit or the remaining Fixed Deposit amount minus the Overdraft availed.