Do you have extra cash sitting in your bank account? You are keeping it in fixed deposits (FDs), so it is considered as an investment right? Sadly, the answer is no. This is due to the fact that our personal inflation rate (click here to learn more) is often higher than the interest rate of FDs.
Bank fixed deposits (FDs) have long been a staple for those looking to park their cash in a relatively safe and accessible manner. However, with interest rates often hovering at modest levels, we should look for alternative vehicles to maximise our returns while managing risk effectively.
I am assuming that you are looking for vehicles not much riskier than FD with better return. Thus, this article would exclude most investment vehicles.
The Alternatives
1. Digital Banks
Have you heard of digital banks? These banks do not have physical branch and we deal with the accounts entirely online. Examples are Aeon Bank, Boost Bank, GXBank (click here to learn more), and Rize. However, Rize (click here to learn more) is not really a digital bank but an online bank by Al-Rajhi Bank.
The good thing about these banks is the interest rates that are on par or better than conventional banks’ FDs. Furthermore, they do not impose tenure on your deposit. It means that you will still be getting the interest even though you withdraw the money after one day. Besides that, the deposits in these digital banks are protected by Malaysia Deposit Insurance Corporation or Perbadanan Insurans Deposit Malaysia (PIDM), just like the conventional banks, up to RM 250,000.
Of these four banks, I personally have accounts with Aeon Bank, GXBank and Rize. My experience with these banks is so far satisfactory. Nonetheless, the functions of their apps are still quite limited and we can only do basic transactions such as transfer and DuitNow QR. Besides that, there were occasional glitches but so far they were all resolved.
2. Government Securities
Government securities, such as Malaysian Government Securities (MGS) and Government Investment Issues (GII), are considered low-risk investment options. These securities are backed by the government and offer fixed interest payments. While the returns might not be significantly higher than bank FDs, they do provide a slightly better yield and could be an alternative to FDs. Normally, these securities require a big sum to invest but there are some ways for retail investors to participate with smaller sum. Just leave your details by clicking the button below if you would like to know more.
This instrument is not protected by PIDM. However, with the backing of the government, its risk is considered very low. If you hold the securities to maturity, you will receive the interest payments throughout the period and also principal at the end of the tenure.
3. Money Market Funds
Money market funds invest in short-term, high-quality debt securities. In Malaysia, these funds are regulated by the Securities Commission Malaysia and are known for their liquidity and relatively low risk. They often offer higher returns compared to bank FDs, making them an attractive alternative for investors looking for a safe place to park their cash for the short term.
This instrument is also not protected by PIDM as these funds are basically unit trust. However, there is a very low risk of capital loss as they often invest the money in low-risk vehicles.
Conclusion
While bank FDs offer a safe and convenient way to save money, exploring alternative vehicles can provide higher returns. Rather than keeping cash in FDs, the three alternatives above are options for investors looking to gain higher return. As with any investment, it is crucial to understand the risks involved and consider your financial goals and risk tolerance before making a decision. Consulting with a financial advisor can also provide personalized guidance tailored to your specific needs.
How can a financial planner help you?
I can guide you to find a suitable vehicle for you to move your idle cash. In order to provide you with appropriate advice, I would need to know your financial goals and objectives. If you have no idea, I can help you to clarify your financial goals and objectives, and also identify your assets and liabilities accordingly.
After clarifying your goals and objectives, we could also develop a plan to reach your goals and objectives. This normally involves saving and investing. Furthermore, I will also help with your tax planning to reduce your tax liability. Depending on your situation, we may also work together in other areas of your finances, such as debt management and estate planning.
If you are interested to explore financial planning with me, just leave your details by clicking the button below. I will reach out to you and see if we would be a good fit for each other.
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Disclaimer: This post is for informational purpose only. You should use judgment and conduct due diligence before taking any action or implementing any plan suggested or recommended in this article.
