About : Fixed Deposit

In Malaysia, by an estimation average of 3.5% interest per year, for 10 years, it would be reached 35% in total. While given 20 years it would give us a total 70% interest for the return of investment. This is not the case for Singapore 0.70 % and Thailand 2.50%.

You may find the world fixed deposit rates at https://www.deposits.org/world-deposit-rates.html

1. Do we think we should invest in Fixed Deposits?
Yes. This is the lowest risk among all the investments scheme or options out there and the most flexible to take out the money when there is an urgent needs.

Everyone is basically complaining it is the lowest return of investment (ROI). However, I am finding it interesting, as it is a very basic tool to calculate ROI.

2. A basic tool to understand Return of Investment?
By comparing on ROI of bank on credit cards vs ROI of our Fixed Deposits, it would make such an impact that credit cards is very mean to tell us, who is the smartest.
Therefore, minimize our outstanding credit card usage is the first thing we need to consider, and then fixed deposit come next as a "saving" strategy.

If we would like to consider other investment option, we need to consider FD as a basic calculation.

For example, I have meet one of the financial institutions that has come out with a plan to suggest the guarantee higher rate of return in 9 years time. Actually once I have calculated it, that guarantee rate is simply (3.5% x 9 years=31.5%), it is slightly the same as Fixed Deposit interest rate.There is even a tricky part that we could even inject more money for that guarantee rate of return.

That person who explain this plan tell me that don't calculate guarantee rate like that. Then, my question is, why not make it a 3 years time for that guaranteed rate since legally professionals and legally business inside the company would exactly proof they are better than Fixed Deposit? Then, that person answer my question, there is "no cheap thing" out there.

Basically, that investment scheme is totally same as Fixed Deposit. If we have bought this type of investment scheme, just consider it as Fixed Deposit with risk option.

To be the safe side, always use Fixed Deposit rate to calculate for any other investment scheme available out there. Then, we would know what are the risk we are actually taking.

3. What would be the best financial product to look out for?
Choose the investment we would be comfortable of with the amount money that we have. Consider Fixed Deposit is the lowest risk, which is the first choice after coming out from our savings. or considered as Savings number 2.

With the RM10,000 investment, given 20 years with a approx average 3.5% interest per annum, our return of investment is 70% of RM10,000 = RM7,000

How do we calculate 70%? It is 3.5% per annum x 20 years = 70% return of investment.

4. What apps or tools used for budgeting and personal finance?
Each investment has their own tools and tips. When we come to understand Fixed Deposit, we would learn how to save our money. Don't ever jump into calculating yearly inflation rate that proof saves money no use, and to proof FD no use at all. It is troublesome to use an apps or tools that we are lazy to update. Read my blog and do ask question in my blog.

5. More investment for the lowest risk, while lowest investment for the highest risk?
Each rate of return investment comes with different level of risk. Be sure we have the most investment for the lowest risk, while the lowest investment is for the highest risk.

Learn of the basic calculation as below:- Yes, budgeting.
For personal, I call it as budgeting.
For investor, I would name it as diversification of investment.

To know the budget, is simply to know the importance of the money for different type of spending.
After that, we would know how to diversify the investment based on different importance of investment as investment is such a complicated topic as compare to budget.

Let's see for the budget, here is the general guideline: Let's assume after deduct EPF = RM3000
Expenses + Food : 30% = RM900
Insurance : 10% = RM300
Car Installment : 25% = RM750
Savings : 10% = RM300
Renting / Savings : 25% = RM750

Once we have calculated this, if the result is RM0.00, or negative, we need to have some discipline on the budget by asking ourselves how to improve it.

6. But is it too small on the Return of Investment for FD?

How experience are we before making such a complaint that FD does not fit our needs?

Let's see what other choices do we have below:-

Would unit trust give us 70% in return in 5 years time? Approx 14% yearly.
Would shares market give us 70% in return in 5 years time? Approx 14% yearly.
Would real estate give us 70% in return in 5 years time? Approx 14% yearly.

Basically all of us would agree in terms of "risk":-

Unit trust is riskier than fixed deposits
Shares market is riskier than unit trusts
Real estates might not generate the return of investment as wanted, probably risky at the end.

We may invest like this

* 10 Years of RM300 monthly saving turn into RM61,658.92 (71.3% return of investment) in 20 years. This kind of plan similar appears in the Insurance Company cum with Protection Plan.

7. What have we learn here?
a) In any kind of investment, please use Fixed Deposits 3.5% yearly in order to think about other investment. If our investment take about 5 years, it would able need to generate at least 17.5% (3.5% x 5 years) at the end of 5 years.

b) Learn the budgeting and savings. We might consider to invest RM1 million Protection Insurance Coverage Scheme to avoid all the money has gone into medical expenses at later age. For hospital bills, it is easier to make our money savings and investment disappear within 1 day.

Medical Plan such as AIA A-PlusMedBooster. Kindly contact our insurance agent for this kind of coverage.


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