Is it advantageous to place funds on deposit?

The answer is not straightforward. It all depends on your current situation. In investments in bank deposits, opening of deposits we await three major risk. The first - inflation, the second - the problems at the bank where we deposit, the third - cheating by the bank, hidden fees and opaque conditions.

At some stages of the economic cycle bank deposits are one of the most attractive investment vehicles. This happens when the stakes are high, inflation is low, and production began to grow. Stock markets are usually ahead of the growth of production, grow before. So at this time to batten down the share prices, investment in them losing interest. It's time to place funds on deposit and wait for the fall of the share price (which will surely come) to invest in them.

Inflation and interest rates on deposits

Reducible bank interest rates - nominal. This means that if you put a certain amount for a certain period, at the end of this period, you will receive the amount invested plus interest, equal to the deposit amount, multiplied by the rate of interest. In this case, your consumer basket during this time go up. It may be that although you get a nominally more money, but with the rise in price of the consumer basket (inflation), will be able to buy goods even less than that would be able to buy before the opening of the deposit. For example, you make a deposit at 4% per annum, and inflation - 7%. Then you actually donate 3% of the bank for the fact that he held your money. I urge you to never open deposits at an interest rate lower than inflation. Let the banks are trying to work, think, but give us a real positive interest rates. Otherwise, why do we need the contributions, we will seek alternative investments, for example, will pay for the electricity for the next ten years. Electricity will go up faster than average inflation.

But even if we discover a positive contribution to real interest rates, focusing on the current level of inflation, inflation may accelerate. This risk can not be predicted. Have to put up with him, opening deposit. Inflation, of course, immediately accelerate at times. So as we lose a few percent of the real value of our capital.

Comparison of return

How to compare returns on different deposits? Nominal value of the rate, driven by the bank does not allow to compare the profitability, if not examine the conditions Interest. For example, interest may be charged each month and can - at the end of the term. Accrued monthly interest can be capitalized to adhere to the principal of the deposit, and then they too will accrue in the next months. To compare the two contributions, you must calculate the amount you receive at the end of the deposit period, and to compare these amounts.

Hidden fees, opaque conditions

Many banks have resorted to unfair methods such as special conditions of interest on deposits, hidden fees, misty conditions of deposit. Met deposits, interest on which to use depends on the credit card of the bank, on which there is a fixed fee, which makes unfavorable interest on deposits. Distributed contributions due to the opening of the retirement account, the conclusion of contracts of insurance, etc. It's all the usual spam and junk. Estimate the real profitability of such investments with all the factors and risks is not possible. The complexity of the product that you offer, a clear indication of its disadvantages. Think about it, why complicate a good, attractive product.

Another typical way of cheating is to have special conditions for withdrawal of funds at the end of the term. Often this involves the removal of the commission of the bank for a withdrawal. Comparing the conditions of different banks, find out the real amount you get your hands on at the end of the deposit term, with all the commissions. That is the sum and compare it.