We have already established how important it is to have investments to make your money grow and to have a more secure future. Although you can gain more returns on investments, some people still prefer to have more security and fewer risks.
This is where time deposits come in. Some people are content with the small interest that they get as long as they know that the returns are guaranteed.
How else do time deposit and mutual funds differ?
Where to avail?
For time deposit, go to your bank, while you have to look for asset management companies to invest in mutual funds.
How much is needed to start?
The lowest amount that you can invest on time deposit is P1,000. For mutual funds, you will need at least P5,000 for the initial investment and P10,000 for the subsequent ones.
Is it guaranteed?
Like what has been mentioned above, time deposit offers a guarantee but provides a lower return. Mutual funds returns are not guaranteed, but the returns are higher.
How much will you earn?
Bank interest rates for time deposits depend on the length of time and the amount of deposit, but it usually ranges from 0.5% to 3.0%. Mutual funds earning depends on the type of fund and the time period.
How long are the terms?
For time deposit, the terms range from 30 days, 60 days, 90 days, 180 days, 360 days, some banks have 5 years. Mutual funds don’t have a required term, but the most advisable term is 3-5 years to be able to maximize the long-term benefits.
Can you withdraw in case you need it for an emergency?
You can withdraw your money on both accounts but you will have penalties and charges. For mutual funds, it will depend on the load structure.
How much tax will you pay?
For time deposit, you will pay 20% withholding tax on your earnings, mutual funds are exempted from tax under the Tax Code.