Fixed Deposit - The Silent Killer
Fixed Deposit or better know as FD has never been my favorite kind of investment. The main reason FD didn’t made to my favorite list is due to the Return Of Investment (ROI) which ranges from 3% to 4%.
I guess i totally oppose my buddy’s post Irwan, on Fixed Deposit as being a safe investment. No hard feelings ya bud, just to keep you on your toes.
I regard Fixed Deposit as a silent killer because of the low ROI compared to the inflation that we are facing. By putting money in the FD, one is loosing money instead of making a return out of it.
Let’s take a FD ROI at 4% while the inflation at 8% (Appoxiamate inflation according to Bank Negara). In short one is loosing 4% per annum by putting money in FD.
At 8% inflation rate one is loosing 4% per annum without realizing it.
If one invest RM 50k into FD
With The Rule 72 Calculation :-
72/4 = 18 years
In short, if one invest in FD with 4% return and at 8% inflation, by 18 years your investment in the FD will become RM 25k.
That is why i name the Fixed Deposit as the silent killer where we won’t realize that we are loosing more then we are gaining. Don’t forget, i only take 8% as the inflation rate. Do you think inflation is that low? ^^
So think wisely before putting all your money into the FD.
If you like my kampung style investment blog, please subscribe to our full feed RSS. You can also subscribe by Email to receive all latest investment updates. Don’t miss out!
(2 votes, average: 2 out of 5)
Loading ...
7 Responses to “Fixed Deposit - The Silent Killer”
By johira on Mar 18, 2009 | Reply
hi
so do you think which kind of account is better to put our money in it?which of them have more interest rate?
By Kampung Boy on Mar 18, 2009 | Reply
To johira : I think at the moment Standard Chartered Saadiq saver gives a higher rate compared to FD. I will make a post on it shortly you check later ok?
Thanks! ^^
By jeff on Mar 18, 2010 | Reply
hmm. but i don’t think FD is the better way to do investment right? It function for those who not willing to take risk in their fund. If to aim more income, why not invest in unit trust, shares..etc. What u say?
By Kampung Boy on Mar 18, 2010 | Reply
@jeff : Sure lar brother! How can you survive on your FD dividend which is less then 3%? Inflation is like 5 times more then what you are getting if you put your money into FD!!
Unless you got like 10 Million in the bank, then it’s fine but smart people don’t really put all their money in FD!
I totally agree with you that unit trusts and shares will give better returns but bear in mind, higher return comes with higher risk!
Happy investing