The most common type of investment in many countries of the world is a bank deposit, which is called a deposit in economic terminology. This choice is due to the rapid and rapid development of the economy and investment sphere. What is a bank deposit and why is it so popular? The immediate availability and simplicity of this method of investing, saving and increasing funds attract ordinary citizens. But few people can really give an exhaustive answer to the question of what is a deposit in a bank. But this is the basis of economic literacy.
What can be called a bank deposit?
A deposit is money deposited in a bank at a certain percentage. After a certain period of time, these funds are subject to return. What is a bank deposit? It is not only money. Vlad can be securities, contributions, payments, precious metals and even real estate. Even without specific knowledge of the economy and investment, it is not difficult to monitor the situation on the market in order to keep abreast of various factors that affect the financial situation of the region. It would seem that everything is simple: you need to deposit the required amount in the selected bank and just wait for the deadline to pick up the interest. Investors, for the most part, require certainty in the services they provide, which includes a constant interest rate. What does it mean? A person wants to have profitable deposits with banks, that is, at the right time to receive the entire amount, taking into account the interest that characterizes the profit. The average layman is not interested in economic factors and trends. That is why deposits are so popular and honorable.
The impact of inflation
If a person plans to solve all his financial problems with the help of a contribution, then he will be disappointed. Basically, almost any bank provides an interest rate slightly less than or equal in level to inflation. What does it mean? If you decide to open a deposit in a bank, then be prepared that inflation will “eat up” almost all the profits. Naturally, a bank deposit can significantly slow down this process, but in matters of capital increase, the deposit is irrelevant. But do not refuse deposits and underestimate them. The vast majority of successful and successful businessmen and investors in one way or another keep parts of their capital in the form of bank deposits. In this case, this choice is dictated by the investment strategy, which includes taking into account the estimated risk and probable profit. As you know, a bank deposit is one of the safest ways to invest money.
In most developed countries, there are special organizations and funds that are guarantors of the return of invested funds to customers in case of bank bankruptcy. This factor must be taken into account by novice investors. Before you bring your money somewhere, you need to understand what banks, deposits, deposits are, look at the ratings of offices of interest, get acquainted with the offered shares, interest rates and terms of deposits. Any additional information will be useful in the formation of your investment portfolio.
Demand deposit
There are two types of bank investments - urgent and demand deposits. The essence of the latter is that you can withdraw money from the account at virtually any time. However, there is a significant minus of such a system - the interest rate is extremely low. That is why this type of contribution is unpopular and disadvantageous.
Time deposit
This type of investment is characterized by a higher interest rate. Profit in this case depends on the term of the deposit and on the amount. The more capital goes to the bank, the higher will be the percentage of profit. What is a deposit in a bank under a fixed-term contract and what are its disadvantages? A significant drawback is that you cannot withdraw money at any time. It is also impossible to replenish the invested amount. But the terms of placement are the widest - from several days to decades. To attract customers, banks make compromises. The bottom line is that you are allowed to withdraw a certain amount of the deposit, but set a certain limit. The interest rate will be different from the fixed deposit, but there is the possibility of replenishment of the account.
Currency for deposit
Today it is not difficult to invest in a wide variety of world currencies. However, in all countries the most popular deposits are in national currency, euro and US dollars. Foreign currency deposits usually have lower interest rates and, consequently, bring less income. To date, multicurrency deposits have gained great popularity. They are characterized by accounting for each currency separately. As a rule, such deposits are formed on the basis of a compromise deposit - taking into account the minimum balance and the possibility of replenishment of the account. A very convenient feature is the transfer of currency to another at the current exchange rate on the interbank market. Interest on deposits in banks with a similar function is usually selected individually for each client. This makes a multi-currency contribution popular with traders, brokers and dealers in the foreign exchange markets.
Interest rate in a bank deposit
A.
To form an investment portfolio, you need to understand the basic concepts. There are two types of interest rates - floating and fixed. The first may change under the influence of state financial institutions that regulate the market. This happens when various factors are taken into account - both economic and political. The fixed rate is directly set at the time of signing the contract at the beginning of the term and will remain the same all the time until its expiration. In a floating bank, it is required to guarantee some kind of minimum profit, however, it is almost impossible to clearly predict the level of income.
It is also necessary to mention such a term as “capitalization”. It means that the funds that are accrued will take into account the size of the deposit itself, plus interest received for a certain part of the period. It is necessary to consider the possibility of capitalization when planning your own investment portfolio and calculating the likely profit.