Fixed deposits are investments that get less attention than government securities, equities or mutual funds but there is no reason why this should be so. Also known as term deposits, fixed deposits are simply offers by banks and other financial institutions to pay you a fixed interest rate if you leave an agreed amount of money with them for an agreed period of time.
How do Fixed Deposits work?
You can get fixed deposits in almost every financial institution in Ghana. They are usually offered for 91-days, 182-days or a year. Most non-bank financial institutions also use the size of the deposit to determine the interest rate they offer you. The minimum amount usually accepted for fixed deposits is GH¢2,000 and the shortest maturity period is usually 91 days.
Advantages
- Easy to understand and invest in.
- Fixed returns. The returns do not fluctuate over the period of the investment so you always know what you are going to get.
- Negotiable interest rate. If you have a lot of money (say, GH¢100,000) to invest in fixed deposits some institutions would actually negotiate the interest rate with you, giving you the opportunity for high returns.
- Relatively low to medium risk. The risk associated with the investment depends on the stability of the financial institution so choose carefully.
- Usually higher returns than treasury bills.
Disadvantages
- Not liquid enough. Do not put your money in a fixed deposit for a year if you are going to need it before the year is done.
- Not as safe as treasury bills. (This does not meant they are high risk though.)
- Not diversified. Fixed deposits don’t give you the diversification a mutual fund does.
At the end of the day, fixed deposits are not a bad investment and they should be getting more attention than they currently are. They can be an alternative to treasury bills if you are looking for somewhere to park some cash for a short period.
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This is part three of my Guide to Investing in Ghana series. You can read part one on treasury bills and part two on mutual funds.
Your blog posts are very helpful and easy to understand. Keep up the good work!
Thanks for reading!
Pls I would like to know how fixed deposited is calculated
what is the basic formula to calculate for interest on fixed deposits?
Please.. I will need special advise from you.. I am student of university of Ghana offering economics ,maths and stat.. Or perhaps I will get your personal contact ..please
E-mail Jerome[at]ceditalk[dot]com
It’s compound interest.
Good read. Very helpful for those seeking basic understanding in investment options in Ghana, like my good self.
Thanks for reading
Can one invest with Ghc500
Yes, you can. Try treasury bills
Educative and very easy to understand. Keep it up.
Any data on banks with the highest interest rates on fixed deposits?
Perhaps this will give a clue http://www.ceditalk.com/2018/03/bank-lending-and-deposit-interest-rates-february-2018/
How much do I earn on fixed deposit?
Fixed deposit rates differ from one financial institution to the other
if i invest from 500,000 ghs in a bank the interest rate is negotiable,what is the best interest rate a bank can give me or which rate should i start offering .since i am giving the bank the huge money.
Which is the best and secured bank to open the fixed account
Thanks for the info.
what is the minimum rate for fixed deposit?
can a noncitizen working in ghana invest in fixed deposit
Nice piece.
I have a question… why is it medium risk? how can you lose money here?
Payback depends on the firm continuing to be in existence.
Please can a 91-day fixed deposit be rolled over with the principal and interest altogether.
It depends on the institution issuing it to you