There is a whole world of investment options out there, with many ways to increase your savings. A fixed deposit is among the best ways to mobilize your idle savings and have them work for you.<\/p>\n
A\u00a0Fixed Deposit\u00a0or FD is a financial instrument through which a person (the investor):
\n1. Gives money to a bank for a certain period;
\n2. Receives interest;
\n3. Gets his money back at the end of the period-The deposited money cannot be withdrawn until the maturity of the deposit.<\/p>\n
Being considered as safe investments they are also associated with certain risks; they are exposed to a varying degree to fluctuations on the markets prevailing interest rates majorly affecting deposits at the time of renewal.<\/p>\n
One of the best way to counteract this risk is with a \u201cstagger\u201d (or ladder) investments, leading to increase chance of obtaining a lower average cost price. This strategy allows you to have access to your money at regular intervals, but take advantage, with some of your money, of the higher interest rates available for longer (short) term deposits. A challenge faced by most of the investors on whether to invest a sum of money for the short term, in the hope that interest rates will improve, or for the longer term with the view of locking in what\u2032s available now \u2013 just in case it falls further.<\/p>\n
For example instead of putting one large sum of money into one fixed deposit of KES 1,000,000 you break the money into bundles of KES 200,000 each .Once all the money is invested you\u2032ll have equal portions coming up for renewal regularly let\u2019s say at an interval of 15days.By doing so, the highs and lows in interest rates will balance out over a period of time.<\/p>\n
Laddering your fixed deposits has some pros and cons as outlined below by Diana Clemet, a Business advisor.<\/p>\n
Advantages of laddering term deposits<\/strong><\/p>\n Disadvantages of laddering term deposits<\/strong><\/p>\n\n