The benefits of investing in fixed rate bonds

Investing your money on fixed rate bonds can boost returns from your savings

08:09 09 September 2013

Fixed rate bonds, also called fixed rate savings account or fixed rate savings bonds are becoming more popular investment type because of higher interest rates compared to the regular savings accounts plus the guarantee that your money will earn a predetermined interest after one or two years of investment.

Longer fixed period will more likely offer higher interest rate.  Thus, for those who can afford to have their money tied up for an extended period, say five years, can benefit from achieving the best possible rate.

Know if fixed rate bond is the right type of investment for you.

If your saving has been sitting idle in the bank for quite some time and you are itching to find a higher interest rate paying investment, then it might be time to try fixed rate investment.

Finding the best fixed rate bonds

Individuals have varying preferences and priorities.  The following points can help you assess the right fixed rate bond account for you:

• Interest rate – knowing exactly what the interest rate is and how it will be applied to your investment over a determined period will make you aware of how much returns to expect.

 

• Period of Investment – know exactly the date when the fixed rate will end.  Generally, after the fixed rate period is terminated, the account will be assigned a lower rate.  Be ready to transfer it to another account offering better rate.

 

• Know the conditions for early withdrawal, if it is allowed, and the corresponding penalties for doing so.

 

• Know the required minimum required investment before applying for an account.  Generally, fixed rate investments require a lump sum investment.

 

• Know when the interest earned will be paid which can either be monthly, annually, or at the end of the fixed rate term.

 

• After the account has been opened, know if you can you add to your investment in case you come by some extra money.  Some do not allow it so it will be better to choose an institution with flexibility.

 

• Know if you will be required to open a regular account before you can open an account for investment because some institutions only allow their current clients to open fixed rate bond accounts.