Fixed-Term Investments: A Beginner's Guide to Safe Growth

Fixed term investments are commonly used as a safe method of investment. Here are the basics of fixed term investments and how they work.

Fixed Term Investment

With a fixed term investment, you are going to invest your money into a security for a predetermined amount of time. Typically, investors will receive a fixed amount of interest with this type of investment as well. At the end of the investment, the investor will traditionally receive the entire amount of investment principal back.

Advantages

A big advantage with this type of investment is that you have some security. Most of the time, this investment represents a debt instrument and you have more of a chance to collect your initial investment back than if you invested into an equity instrument.

Another advantage is that you will traditionally be able to calculate exactly how much of a return you will earn on the investment. This provides you with some stability and predictability in your portfolio.

Disadvantages

One of the big disadvantages with this type of investment is that your money will be tied up for a specific amount of time. If you try to be your money back, you might have to pay penalties or early distribution fees.