The myth
Investing in a time deposit means that you won’t be able to touch your money for a certain length of time. Also, the amount of profit such products can earn is limited since it has a fixed interest rate.
Some people view such factors as limitations that could keep them from having a good investing experience. That’s why they believe that time deposits aren’t good investments.
The reality
Both the time and the returns are factors that you’ll have to be OK with before you put your money in a time deposit. However, neither of them should automatically exclude this product from your portfolio.
If you have a proper and complete emergency fund, and nothing goes wrong with your finances, you probably won’t encounter any issues with keeping your money in for the full term. You may find yourself choosing to do a rollover on maturity, to take advantage of compounding interest.
Assuming that you found a time deposit whose interest rates are acceptable, the limited (as compared to some other investment types, such as stocks) returns may not be an issue either. The predictability of its growth can be a good balance for your other assets, especially considering the relatively minimal volatility.
Another advantage of a time deposit, and one that is unique to this product, is that it’s covered by the Philippine Deposit Insurance Corporation or PDIC as a deposit product. This can add a little more reassurance to your investment.
The verdict: False.
Whether or not you should invest in a time deposit depends on your situation and the current assets in your portfolio. However, such product could provide predictability and stability for your overall holdings.
If you’re looking for an asset that could balance out the more-volatile ones that you already have, and you are OK with keeping your money in for the full period and with receiving a set amount at the end, time deposits are worth considering.
If something unexpected happens and you really need to pull your money out, remember that this can be done. Just keep in mind that it will have an effect on the profit that you’ll earn from this investment.
