Last week, one of my friends ask me about fixed deposit and unit trust. He have a RM20,000 and don’t know where to put that money.
He ask me which one is gain more profit either fixed deposit or unit trust. I’m ask him again on period the money to be hold and he answer for 1-3 years.
So, I’m giving some explanation and advice to choose fixed deposit as the period is short term and there’s a risk he can’t get his actual money.
Unit Trust is more profitable but it ain’t for short term. There’s a risk as it depend on which place the fund managaer invest our money. If you want to choose either fixed deposit or unit trust, there’s a difference between this type.
1) The main difference is, Fixed Deposit is saving while Unit Trust is Investment.
2) The objective for Fixed Deposit is to preserve the nominal value of capital while Unit Trust is to generate capital growth over the long term.
3) The inflation for FD is may not keep pace with inflation over the long term while higher returns can potentially outpace inflation over the long term.
4) The liquidity for FD based on the maturity period. Interest income from FDs may be forfeited if the FD is redeemed before maturity while Unit Trust highly liquid and can be redeemed at any time.
Look at yourself . Are you a moderate risk taker or are you able to bear higher risks to achive higher return? This is important to choose whether Unit Trust or Fixed Deposited.
If you are investing to achieve higher retursn, then investing in unit trus is the way to go since the long term returns are sufficient too justify the downside risks.
As a conclusion, to choose Fixed Deposit or Unit Trust you must know your goal and objective. Hopefully, my friends could do his decision.
Reference:- Public Mutual