Fixed Deposit: A Risk-Free Investment with Stable and Guaranteed Returns

Finding ways to increase your wealth can be challenging, particularly when you are new to the world of investments. Nevertheless, a fixed deposit or FD offers a safer and more practical alternative way of saving money when compared to other ways. An FD supported by the government guarantees a return despite the market conditions.

Jar with coins and a plant - fixed deposit article

Protected by PIDM insurance, a fixed deposit is a low-risk and suitable investment option for beginners in Malaysia. You can place a fixed deposit online and get it quickly approved in Malaysia.

What is a Fixed Deposit?

A fixed deposit, or FD for short, in Malaysia, is a type of bank product that calls for depositing money for a predetermined period. You can withdraw a deposit only at maturity, so you need to wait until the pre-decided period has passed to withdraw your investment and avoid being charged a penalty. Another name for an FD is a term deposit.

The interest is only paid when the account reaches maturity, as opposed to regular savings accounts which get the interest calculated and credited at the end of every month.

For instance, if you put your savings into an investment for a year, you will receive both the principal and interest after the set period. Given that the investment term and interest rate are already set; you can calculate the interest you will earn.

With most banks like RHB offering Internet banking, placing a fixed deposit is so convenient now. Called eFixed Deposit, you can enjoy various benefits like:

  • Make new placements on the online portal of the bank anytime
  • Apply for a fixed deposit online easily
  • Access the details of your FD account anytime
  • Enjoy PIDM protection 

Get to Know Different Types of Fixed Deposits in Malaysia

Fixed deposits in Malaysia include:

  • Short-Term Fixed Deposits

With a short-term fixed deposit, you can save your money and allow it to grow for a short period. It has a typically shorter maturity period, and you do not have to wait for a long time to reach maturity. Depending on how long you want, a short-term fixed deposit can range between one month and six months. You can also find one to nine months fixed deposit terms under this category.

  • Long-Term Fixed Deposits

Long-term fixed deposits are typically those with a placement period of at least 12 months and above. You can have this type of fixed deposit in Malaysia for as long as 60 months.

You cannot access your savings during the placement period. If you want to earn higher interest rates, you can choose this option though you can withdraw the money only at maturity.

  • Islamic Fixed Deposits

When it comes to Islamic fixed deposits, the depositor gets a return depending on the bank’s performance; hence, the profit rate can change. Conventional fixed deposits, unlike Islamic fixed deposits, allows you to receive interest for your savings. Nevertheless, ‘riba’ or interest is against Shariah principles. You contract with the bank, which acts as your agent and makes investments on your behalf. Any profit is shared with you by the bank based on the profit-sharing ratio determined earlier.

Under Islamic banking, you can find a range of Islamic fixed deposits. Some common Islamic fixed deposits offered in Malaysia are:

  • Murabahah Deposits

The Murabahah is an Islamic financing commodity that refers to buy-and-sell agreements with a higher cost, as well as profit. This entails the acquisition and disposition of assets by either two (Bai Al-Enah) or several parties (Tawwaruq or Commodity Murabahah). Tawarruq deposits “halal” goods, while Bai Al-Enah deposits a wide variety of Shariah-acceptable assets, excluding gold and silver. Depending on the deposit term, the profit, which is pre-decided, is paid immediately or at the maturity of the term.

  • Mudharabah Deposits

You can open a Mudharabah deposit with a bank in Malaysia investing money for a fixed period. The Mudarib or bank manager uses the funds in ways that comply with Shariah. Between the bank and the customer, there is a predetermined profit-sharing ratio, wherein the profit is computed every month. Fixed deposit contracts for Mudharabah come in three different varieties. However, the Mudharabah General Investment Account (MGIA) is the most preferred by investors.

  • Conventional Fixed Deposits 

With a conventional fixed deposit, you get a guaranteed return depending on the investment period. The period or term of fixed deposits varies based on the bank and the product, which ranges between 1 month and 60 months.

The fixed deposit with a predetermined rate of interest must be honoured over the specified period, regardless of the bank’s performance.

Benefits of Fixed Deposits in Malaysia

Some reasons for putting your money in fixed deposits in Malaysia are:

  • You have placement periods ranging from 1 to 60 months, giving you the flexibility to choose the term.
  • The returns in fixed deposits are guaranteed.
  • Offers partial withdrawals keeping a minimum balance of RM5000. You can withdraw your savings in multiples of RM1000, without disturbing the fixed interest rate on the balance
  • Deposits are protected by Perbadanan Insurance Deposit Malaysia (PIDM)

Starting a fixed deposit online offers a guaranteed return and is low risk. However, you must take into account the length of the investment and the associated penalty fees.