Welcome to Lab Ledger Blog

What are the best time deposits to invest your money?

smart investing tips

What are the best time deposits to invest your money?

Many times it is not clear to you if what a fixed term deposit offers you is really what you are looking for. Maybe you don’t have enough information to value it.

You should know that today, if what you want is to make your savings profitable, a fixed-term deposit is not the best product. Why? In this article you will discover it, and you will be able to correctly assess the pros and cons of the different types of bank deposits.

What is a fixed term deposit?


A fixed-term deposit consists of an amount of money that you deposit in a bank for a certain time (usually from 3 to 24 months). After that period, the bank will return the money plus the interest that had been previously agreed.

There is also the option that these interests are paid periodically during that time interval, in an account that the client has open in that bank.

The main characteristics of time deposits are:

  • They have an expiration date, when you withdraw the money and interest. If you want to have that money before the date is up, you will normally have to pay a penalty. This penalty cannot exceed the gross interest value since the operation began.
  • You cannot debit receipts or payrolls to that account while the deposit is in effect.
  • Generally, time deposits pay more interest than other types of deposits.


The interest rate is what the bank will pay you for the money you have deposited. In order to compare the offers of the different entities, it is recommended that you use an indicator, the Annual Equivalent Rate (APR), and that you compare deposits with equal terms. The APR is the cost of a financial product and is a reliable indicator of actual performance.

Differences between deposits and funds


This is a common question among those who have doubts about the best tool to monetize their money.

Below, you will see the main differences between these two savings methods:

  • In deposits it is the investor who gives his money to the bank so that it will return that amount in the future plus interest. In the funds, the investor retains ownership and the bank can only move the capital as agreed in the contract.
  • As for liquidity, in deposits you have to pay a penalty if you want to dispose of the capital early.
  • In funds, however, liquidity is daily and the withdrawal of capital does not imply the payment of a commission.
  • In terms of taxation, funds have many advantages over deposits, since you have the option of transferring money from one fund to another without having to pay taxes until the moment you pay your investment back.

Regarding flexibility, the funds offer a great diversity to choose from. This is not the case with deposits that generally have the same characteristics in all entities.

As for profitability, the main difference is that the price of the fund varies daily, while the tank is static.

The term of the deposits is defined with an expiration date. By contrast, in the vast majority of funds there is no predetermined maturity date.

What about guarantees ? Can you lose your money? Deposits are insured in Europe for up to € 100,000 per investor. But if your capital exceeds this figure, it is possible that, if necessary, losses will occur. In the case of funds, there is no risk of liquidation loss, but the risk is that investments may drop in price, which will cause the capital invested to decrease. Look for funds that offer a guarantee from the bank.

The most profitable time deposits, are they really worth it?


Often, banks use as a hook for fixed-term deposits that, with them, you ensure that all the money invested in them will be returned to you. But the truth is that as a formula for saving they are not profitable.

One of the biggest excuses when hiring a deposit is the hidden costs, those that are not counted to the client. In the end, it is you who is giving a loan to the bank, which uses the deposits as a financing mechanism.

The important thing is to be clear about the interest that you are going to charge the bank for that “loan” that you are making to it, to be able to conclude if said deposit is profitable or not.

Going back to the previous statement in which banks assure that you will recover 100% of what is invested, the truth is that this is never true due to a factor that goes unnoticed but is very noticeable over time, inflation.

When talking about the profitability of a deposit, it must exceed the minimum profitability objective.

Real profitability must be taken into account, which is the one that compensates the effect of inflation during the period of the deposit.

In summary, if your bank does not offer you a sufficient return that exceeds the effect of inflation, you will lose approximately every year around 1% of the invested capital.

Another situation that may occur is that interest rates rise while your capital is frozen in a deposit. Then inflation will also rise. In this way, while the interest rate on your deposit will remain static, inflation will increase, since it affects everyone equally, negatively impacting the capital of your deposit. This is what is known as opportunity cost.

Finally, we must not forget that it is your obligation to tax the Treasury for your benefits. You must take into account the tax withholding percentage, which amounts to a minimum of 19% and is not included in the APR of the deposit. The bank will pay you the interest with this deduction already discounted.

Thus, even in the most profitable fixed-term deposits, the return obtained discounting the effect of inflation, is usually not positive. In other words, not only will the initial capital invested not increase, but it will be slightly less when the deposit period ends.

Thus, if you are looking for a savings tool, the fixed term deposit is not your best option. Fortunately, there are other long-term savings products on the market, such as PIAS, Investment Funds, or Pension Plans, which turn out to be much more profitable alternatives.

To make the best decision, it is essential to have a good financial education, otherwise, it is easy that you do not get to properly monetize your money. If you do not have much knowledge in this area, it is recommended that you let yourself be advised by qualified personnel when choosing the best option for saving and investing your capital.

Leave a Reply

Your email address will not be published. Required fields are marked *