Understanding Characteristics of Fixed Term Investments

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Remember that the government only represents about 30% of our retirement income, the company retirement pension plan offers another 30 % and many of us do not have one. It is up to individuals to invest wisely short and long term in order to make up for the short fall if he or she would like to live comfortably after retirement without giving up some retirement plans. In this article, we will discuss the characteristics of fixed term investment.
There are many types of fixed term investments ranging from 1 to 5 years:

1) Term deposit
a)The rate of return on term deposits is usually higher than on savings accounts. Some institutions may allow the funds to be withdrawn before maturity by sacrificing some interest.
b) Interest rate is guaranteed and is higher than savings account.
c) Term deposit usually has a term of 1 year or less.
d) A minimum deposit is usually required
e) Term deposit is guaranteed by the Deposit Insurance Corporation for certain amounts of difference from country to country.

2. Guaranteed investment certificate
a) GICs have terms ranging from 1 to 5 years.
b) The interest rate is guaranteed.
c) The money is usually locked-in until maturity.
d) Some financial institutions may offer higher rates with a minimum deposit requirement.

3. Treasury bill
a) Short-term promissory notes issued by the federal government are called treasury bills, or T-bills.
b) The usual denominations are $1,000, $5,000, $25,000, $100,000, and $1,000,000, with terms up to 365 days.
c) Treasury bills are always sold at discount rate.
d) Investors can sell them before maturity at a price determined by current interest rates.
e) Investors can buy older issues of treasury bills from investment dealers. Investment dealers now make treasury bills available to small investors at $1,000, and provide increments of $1,000.

4. Mortgage-backed security
Mortgage-backed security are a large pool of residential mortgages sold by institutions offering mortgage for home buyers.
a) Each pool of mortgages has its own interest rate and maturity date.
b) There are two types of mortgage-backed securities exist: pre-payable and non-prepayable. Pre-pay means the pools of mortgages permitting home buyers to make pre-payments, in order to repay their mortgages faster.
c) Each month, an investor of mortgage-backed securities receives an income proportion of his or her principal and interest of the mortgage.

I hope this information will help. If you need more information, you can read the complete series of the above subject at my home page:

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