Guide to investing in fixed deposits in Ghana

Fixed deposits are investments that get less attention than government securities, equities or mutual funds but there is no reason why this should be so. Also known as term deposits, fixed deposits are simply offers by banks and other financial institutions to pay you a fixed interest rate if you leave an agreed amount of money with them for an agreed period of time.

How do Fixed Deposits work?

You can get fixed deposits in almost every financial institution in Ghana. They are usually offered for 91-days, 182-days or a year. Most non-bank financial institutions also use the size of the deposit to determine the interest rate they offer you. The minimum amount usually accepted for fixed deposits is GH¢2,000 and the shortest maturity period is usually 91 days.

Advantages
  • Easy to understand and invest in.
  • Fixed returns. The returns do not fluctuate over the period of the investment so you always know what you are going to get.
  • Negotiable interest rate. If you have a lot of money (say, GH¢100,000) to invest in fixed deposits some institutions would actually negotiate the interest rate with you, giving you the opportunity for high returns.
  • Relatively low to medium risk. The risk associated with the investment depends on the stability of the financial institution so choose carefully.
  • Usually higher returns than treasury bills.
Disadvantages
  • Not liquid enough. Do not put your money in a fixed deposit for a year if you are going to need it before the year is done.
  • Not as safe as treasury bills. (This does not meant they are high risk though.)
  • Not diversified. Fixed deposits don’t give you the diversification a mutual fund does.

At the end of the day, fixed deposits are not a bad investment and they should be getting more attention than they currently are. They can be an alternative to treasury bills if you are looking for somewhere to park some cash for a short period.

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This is part three of my Guide to Investing in Ghana series. You can read part one on treasury bills and part two on mutual funds.

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Jerome Kuseh

Financial Analyst | Accountant | Private Investor
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