This Is What Investors Have To Consider. The choice of investment products is immense. There is something for every consumer requirement: a lot of security, flexibility or a high return. Depending on the investment objective, you may be able to forego the possibility of having access to your capital investment at any time. Thus situated, you can invest your money firmly. This means that you are choosing less flexibility in favour of more security and a higher return. The money is then invested in a financial product for a predetermined time and cannot be withdrawn early.
How And Where Can You Invest Money Firmly?
The best-known way to invest money is probably the fixed deposit account with a bank. In doing so, you pay the bank an amount of money that is no longer available for a specific investment period. In return, the bank offers interest on the deposit. However, there are other options for fixed investments. Other examples are bonds, also called annuities, or savings plans.
TIP! Compare interest rates! Investors should regularly compare the interest they are currently getting at their bank with the current “top offers” (there are many time deposit calculators on the Internet). If they are significantly lower, you should think about switching providers.
Here you lend a sum to a company or a state and receive a fixed interest rate over the agreed term. Another investment option that also offers fixed interest rates but higher potential returns is real estate crowd-investing. Investors invest in real estate projects that were previously only open to large investors, as only they could raise the high sums that were necessary for the investment. Equity crowdfunding platforms now enable private investors to join forces and raise large amounts together. The terms for crowd investments are usually between 1 and 5 years—interest between 5.0% and 7.5% per year.
When And Why Is It Worth Investing Money Firmly?
Fixed-term deposits offer an excellent advantage for both the provider and the investor: planning security. Banks, for example, can work better with the money because they can better estimate how long it will be available to them. Through the eyes of the investor, this has the advantage that he usually receives a higher rate of interest than with overnight money because the recipients reward the fixed investment period. Besides, unlike some other investment products, the interest rate at the time the contract is concluded is guaranteed for the entire term – regardless of market collapses and interest rate fluctuations.
With all the advantages, however, one should keep in mind that it is not always worthwhile to invest money firmly. Ultimately, this means that the investor can no longer access his cash for a predetermined period. As a nest egg for bad times or unexpected expenses, which must be available quickly and at short notice, a multi-year time deposit is therefore not suitable.
It is therefore advisable to invest money firmly if you are sure that you will not need it through the investment. Then you can confidently benefit from the advantages.
What Do You Have To Consider When Investing In A Fixed-Term Deposit?
As with other ways of investing money, as an investor you have to keep an eye on inflation when you invest money: Since consumer goods are becoming more and more expensive, interest rates should be always much higher than the inflation rate – otherwise you can end up with Don’t buy more for the investment period, but in the worst case even less for the amount of money invested.
With fixed-term deposits, you have a little more leeway to hedge against inflation than, for example, with overnight money – but you should still keep in mind that interest rates, especially for bank deposits, are currently at a very low level and are therefore looking for alternatives like this Look around real estate crowd investing.
TIP! During the term, inflation can climb higher than the guaranteed interest rate that was agreed upon when concluded the contract. Through the eyes of the investor, this means that he should not tie up all his money for a long time, but instead split it up according to years: For example, part of the investment amount can be invested for one year, a second for three years and the rest for five or more years. This avoids the fact that, despite rising inflation, you cannot switch to investment forms that compensate for them.
The 4-Point Checklist For Fixed Investments:
Eligibility: You should not need the money for the entire term.
Product: Depending on the willingness to take risks and the expected return, you have to choose a product. (fixed-term deposits, bonds, crowd investing)
Interest check: the interest rate should be above the inflation rate.
Splitting: You shouldn’t put everything on a term, but spread the amount over 1, 3 or more years.
The main thing is not to throw away your money in a hurry for a long time so as not to get nasty surprises. If you follow these checklist tips, it is not difficult to find the right investment product.
TIP: Divide your money into different asset classes!