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.