Investing can help you keep with the growing inflation rates and set and achieve goals in your career. Whether it’s buying a car, owning a home, getting a car or planning for retirement, investing can cater to your immediate as well as future needs.
There are quite a few ways to invest your hard-earned money. But the terms of each of these investments, the net returns they offer on maturity and the risks associated with each of them are all different.
There is no single form of investment that is the suited for every investor. It depends on factors like investor needs, size, risk appetite, term etc.
So, we can’t classify any investment as best or worst investment options. But one can classify investments based on term or risk associated.
We look at some of the options that are available to South African Investors. Investments can be broadly classified into 3 types:
- Short Term Investments
Short-term investments are meant for those who want to save their money for a year or so with low returns to moderate returns. Short-term investors normally look for liquid assets in which they can save their money without much risk or less risk.
As these investments mostly involve low risk and thus, the returns are also low. Short-term investments can be further classified into:
- Savings Deposits or Call Deposits
A call deposit account is a type of a savings account offered by banks.
Like in a checking account, call deposit accounts offer unlimited deposits and withdrawals, and also you can have instant access to your money from an ATM, a mobile application or the like. Also, you can get interest on the amount deposited which can vary from 3-5%.
However, call deposits accounts are tier-based and usually have a minimum balance, which is necessary to be maintained to enjoy the benefits.
Fixed-term deposits( or just term deposits) are also offered by banks and have a specified term of maturity.
Fixed-term deposits offer higher interest rates than call deposits. The term of the deposits can be variable. Like call deposits, the returns are based on the amount deposited.
Unlike call deposits, fixed-term deposits don’t offer withdrawals before maturity. In case of a premature withdrawal, the investor is penalized, apart from the fact that it may take several days to do so after having notified your bank.
Savings & Fixed term deposits generally have low risk as your deposit is with regulated financial institutions i.e.: banks and your funds are not affected as in case of market investments.
You need to check with your bank for types of savings & fixed deposit options available and their returns.
Fixed-income investments pay the investor a pre-decided amount of money (as interest accrued or as dividend payouts) at regular intervals of time, up till the investment reaches maturity.
Upon maturity of the investment, the principal amount is returned to the investor. Also, the amount of money received by the investor…