Common Fixed Deposit Mistakes to Avoid

Posted by admin
on March 5, 2020

When it comes to making investments in Singapore, you have countless options available. Depending on the amount you are willing to invest and your risk-taking capacity, you can choose between stocks, bonds, mutual funds, insurance policies, fixed deposits, etc. Talking about fixed deposits, it is a good option for those planning to invest a fixed amount for a considerable period without withdrawing money or expecting multiple returns. However, while investing in fixed deposits, people end up making a lot of mistakes that may cost them a lot. Listed below are some of the most common mistakes.

No Clear Goals

Having a goal gives us a clear idea about what we want to do. If you do not have a proper goal when it comes to investments, then you might end up disappointed. Your aim should be easy to achieve. Your objective matters a lot in forming a strong strategy for investments. You might want to save money in a fixed deposit for various reasons like for a wedding, higher education, vacation, retirement, etc. The strategy that you choose when you are investing your money depends on your aim and also on your goal.

Making Long-term Investments

Generally, the longer the fixed deposit term, the higher the interest rate. Before locking in that attractive rate with a five-year plan, you should do your homework first. The last thing you want to do is commit to a lengthy fixed deposit right before the federal reserve increases rates. It is a good idea for fixed deposit investors to keep an eye on fixed deposit news headlines to understand when rates might fluctuate. It is also important to note that significant increases in fixed deposit rates typically occur over several years.

Tying up your funds over a long period could prevent you from taking advantage of fixed deposits with higher yields if they become available further down the road. While it is possible to pull your funds out of a fixed deposit before it matures, doing so usually results in penalty fees – which can take a real bite out of your interest earnings, and in some cases even your principal.

Selecting a Bank Without Any Research

There are plenty of banks out there offering fixed deposits. Whether you are more comfortable putting your funds into a local, regional, or national bank, it pays to evaluate a few different financial institutions to see what fixed deposit rates they have to offer. Trying out the bank down the street instead of the bank you have your current account with might make sense if they are offering a more competitive rate. Be sure to ask your bank about any fixed deposit specials they might be offering too. Visit several banks personally or check the terms online of various banks before you compare them and select the best bank for your fixed deposit investments.

Missing Out on Diversification

Although “diversifying” in the investment world typically means having different types of investments such as stocks, bonds, and fixed deposits,. You can also diversify your fixed deposit investments specifically. This is where fixed deposit laddering comes in. Basically, fixed deposit laddering is when you set up multiple fixed deposits that will mature at staggered intervals, so you will have access to your fixed deposit funds on an ongoing basis. Fixed deposit laddering typically involves a mix of short and long-term fixed deposits, so you can reap the benefits of longer terms with higher rates, while still having other fixed deposits maturing regularly.

Keeping Aside Insurance

A fixed deposit scheme and an insurance policy are two very different investment options. The benefits of either of them can never overlap those of the other. Having insurance is necessary, even if you have invested in fixed deposits. The insurance covers all the uncertainties in life, and if anything bad happens, you will be prepared. Having a basic insurance coverage like health insurance and life insurance is very important. If anything happens, having insurance will not affect your future financial goals. These policies help secure your family and loved ones in unforeseen events. This way, in cases of emergency, you always have an insurance policy as a backup option. This will ensure that you do not have to break your deposits or other investments in case the urgent need for cash arises.

Not Following Up

You must keep a tab on all your investments periodically. At every stage of the investment, you need to have a clear record of the returns and the account details. Pay attention to your bank statements and passbook entries of the fixed deposit account. The benefits that you get from your investments are affected by a lot of factors, including the current market scenario. Once your fixed deposit matures, you have a chance to withdraw your funds or move them to another fixed deposit or investment. This is a great opportunity to see if there are higher rates available for your savings.

Now that you know the kind of mistakes people end up making, you can be careful in the process of fixed deposit investing. Right from the beginning, you can watch your actions and ensure that you don’t make any errors throughout.


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