Comparison of Time Deposit and Mutual Funds – Managing finances and choosing the right investment instrument is crucial. Placing funds in a secure investment is a primary focus for many people, and time deposits and mutual funds come as attractive options.
Time deposits offer a fixed interest rate and a specific term, while mutual funds provide diversification through professionally managed securities portfolios. Each has its own enthusiasts, so it's essential to understand the advantages and disadvantages between time deposits and mutual funds.
Read the following article so you can make smarter investment decisions aligned with your financial goals.
Also Read: Indonesia Deposit Insurance Corporation (IDIC): What You Need to Know?
Time Deposit vs. Mutual Fund: Which Is Safer?
1. Security and Risk
Time deposits excel in high capital security due to guaranteed interest rates and fixed terms. Furthermore, the comfort and security of these deposits are balanced by low-risk levels.
On the other hand, mutual funds involve market risk because their value is influenced by stock market performance (example: stock and bond price fluctuations). Even though it has the potential for higher profits, the risks also tend to be greater.
If you're a beginner and wish to avoid high risks, time deposits are a safe choice for you.
2. Liquidity
Time deposits tend to be less liquid compared to mutual funds. Mutual funds have higher liquidity, allowing you to make withdrawals at any time.
However, the redemption process for mutual funds generally starts on business days when the market is open. Additionally, you are not certain when you will receive your money, as you may have to wait for the settlement period (1-3 business days) until the funds are credited to your Customer Fund Account.
On the contrary, time deposits with a specific tenure may require you to wait until maturity to withdraw funds without penalties. The advantage is that you know exactly when you will receive your money. By the way, there are some deposits that you can withdraw anytime and anywhere, such as the Smart Saver deposit from Whiz.
3. Profit Potential
Mutual funds have a higher profit potential than time deposits, but they also come with higher risks. By utilizing the growth potential of the stock market, mutual funds can provide more lucrative returns. However, the associated risks are more significant.
Meanwhile, time deposits offer a fixed interest rate, providing significant benefits when held for the long term due to stable interest rates and very low risk.
4. Government Security Protection
The security of investment instruments depends not only on the financial institutions providing them but also on the protection granted by the government. Time deposits are guaranteed by the Indonesia Deposit Insurance Corporation (IDIC), providing additional protection for funds up to a certain limit. In contrast, mutual funds lack similar government protection.
Therefore, in terms of security, time deposits are safer, especially if you are a beginner or want to avoid significant risks.
Also Read: Benefits of Deposit Investment for Early Retirement
That's the comparison between time deposits and mutual funds for your secure investment. After reviewing this comparison, do you now know which investment option suits you?
If you want a time deposit that is safe and profitable, Whiz's Smart Saver deposit is the answer. You can get a 6.75% interest rate, and it's secure because Whiz collaborates with banks registered as participants in the deposit insurance program.
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