Learn about fixed interest investments such as fixed deposits, bonds, and short-term securities.

Fixed Interest

Fixed interest securities involve investors lending money to the issuer. In other words, you are effectively investing in debt. The investor receives periodic interest income for the duration on the fixed investment until maturity. Some fixed interest securities can be resold again in the secondary market. Upon maturity, you would receive back your principal from the investment. Fixed interest securities are characterized  as conservative and with low volatility.

 

Short-Term Fixed Interest

Short-term fixed interest securities are below 180 days. Short-term fixed interest securities are purchased at a discount to the face value hence are also known as discount securities.

  • Malaysian Treasury Bills (MTB): short-term securities issued by the Government of Malaysia with original maturity of less than one year.
  • Bank Negara Monetary Notes (BNMN): short-term securities issued by the BNM based on conventional principles.
  • Bank Negara Monetary Islamic Notes (BNMN-i): short-term securities issued by the Government of Malaysia based on Islamic principles.
  • Commercial Papers: short term securities issued by Cagamas (National Mortgage Corporation of Malaysia) or private corporations.

 

Long-Term Fixed Interest

Long-term fixed interest are generally bonds and have a maturity of above 1 year. A bond’s duration affects the bond price volatility including the coupon rate, maturity and yield.

 

Other Similar Investments

Fixed Deposits are also known as certificate of deposits (CDs). Although not strictly falling under fixed interest, we have group FD together as are generally stable with a known maturity period and fixed returns rate.

Cash Management Funds aka money market funds provide FD like returns while remaining liquid with no lock-in period and can be accessed on FinTech platforms and apps.

Endowments are also grouped with fixed interest as it arguably shares some similar characteristics. Endowments aka savings plans have a fixed maturity period and both a fixed return component. Endowments are actually life insurance products coming with a sum assured, and also have a variable return component.

 

Guides

  • Fixed Deposits – What are your best options for low risk FD returns.
  • Cash Management Funds – FD killers (?!) allowing you FD like returns with better liquidity & no lock-in periods
  • Bonds – Understanding bonds, coupons, par value, ratings and more.
  • Endowments – Should you consider investing in an endowment (aka savings plan).

 

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