Fixed Deposits vs. Property Investment - Which Is Better?

Fixed deposits have guaranteed returns and higher interest rates than savings, but you cannot easily access your funds, among other disadvantages. Investing in property offers stability as well, and much higher returns, but it does have a high cost barrier to enter.
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With so many investment options available these days, it can be tough to decide which is right for you.

Before jumping into any investment plan, it’s worth taking the time to think about your needs and goals - and your general appetite for risk, of course!

Once you’ve done this, you can figure out the type of products that are suitable for you - but even then, the choice isn’t as clear-cut.

Often, investors with a substantial sum of money lying around are torn between putting their savings in fixed deposits (FD) or property investment – both of which have their own set of pros and cons.

In this article, we’ll explore the advantages and disadvantages of fixed deposits and property investment to help you decide which one is right for you.


First Up, What Is A Fixed Deposit?

Fixed deposits are low-risk investments that earn you interest over a fixed period – all you have to do is park your money with a bank.

However, the rate of interest on an FD depends on a few things, such as the amount you invest, the term you choose, and the prevailing rates of interest set by the bank.

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Advantages Of Fixed Deposits

1. Guaranteed Returns

Unlike the property market, fixed deposits are far less volatile.

For example, if you invest RM5,000 for 18 months and the interest rate is 4.55% per annum, you’ll get RM5,341.25 at the end of the investment period.

2. Higher Interest Rates Than Savings

The other advantage of fixed deposits is that it gives investors higher interest rates than ordinary savings.

As of February 2019, fixed deposits provide an average of 3-5% interest, while ordinary savings only provide up to 0.8% interest per annum.

3. Make Use Of Fixed Deposit Promotions

Many banks offer good promotional interest rates on fixed deposits. Currently, Bank Islam is running a promotion that offers an interest rate of 7% on deposits of more than RM50,000.

So, before you choose where to put your money, make sure you’ve thoroughly researched the space and are fully aware of the differing rates out there.

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Disadvantages Of Fixed Deposits

1. Fixed Deposit Rates Are Steady But Not Always Attractive

The one big disadvantage of fixed deposit interest rates is that it’s considerably lower than other investments such as real estate and stock market trading.

2. Cannot Easily Access Your Funds

As your money is locked away with the bank for years, you don’t have the flexibility of accessing your funds easily.

What’s more, if you choose to withdraw your money before the committed time period, you’ll end up paying a penalty or forfeiting the interest earned.


Property Investment

What Is Property Investment?

Investing in property is one of the most popular ways to grow your wealth in Malaysia. There are a couple of ways investors can make money through real estate investments.

The first is through capital gains, whereby a person makes a sizeable profit by selling their property.

For example, if you bought a house worth RM400,000 but managed to sell it for RM850,000 – you’ve made a gain of RM450,000.

The other way to make your property investment count is through rental income.

To find out the rental yield, property owners need to add up their annual rental income and convert that into a percentage of the property value.

For example, if you bought a property for RM400,000 and are renting it out for RM4,000 a month, your annual income from the property would be RM48,000, while your rental yield will be 10%.

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Advantages Of Property Investment

1. It Offers Stability

Like fixed deposits, property investments are a relatively stable investment when compared to more volatile investment options such as the stock market.

A consistent monthly rental income can help homeowners cover their expenses as they look out for potential buyers.

2. Your Property Value Can Rise

Unlike fixed deposits where you earn a stable interest rate over a certain period, the value of your property investments can rise depending on the market situation.

So, homeowners can expect to profit hugely during a property boom or inflation.

3. Taking Advantage Of Tax Benefits

Another thing that makes property investments attractive are the associated tax breaks.

Earlier this year, the government revised Real Property Gains Tax rates (RPGT), giving tax exemptions to low-cost and budget homes below RM200,000.

Beyond this, Malaysian citizens and permanent residents are given a once-in-a-lifetime exemption on any chargeable gain from the disposal of a private residence. So make sure to use this wisely!

Learn more about the different types of property investment in Malaysia and how to earn from them.

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Disadvantages Of Property Investment

1. Cost Barrier

The minimum investment for fixed deposits hovers between RM5,000 to RM10,000, but the cost of buying a property can be significantly higher.

In Malaysia, buyers are required to pay a minimum 10% downpayment on a house purchase.

This high entry cost deters a lot of potential investors who might prefer putting their money in an FD, stocks or even gold.

2. Cannot Sell It Off Quickly

With fixed deposits, stocks and other investment types, it’s easy to quickly liquidate your assets. Property, on the other hand, takes longer to sell and also depends on prevailing market conditions.

3. More Unsteady Than Fixed Deposits

Unlike fixed deposit rates, mortgage rates and RPGT tax rates can rise.

In fact, as part of the 2019 budget, the Malaysian government increased RPGT tax rates to 5% (as compared to 0% previously) for properties held by Malaysian citizens for more than five years.

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Both property and fixed deposits can be attractive investment options so long as they suit your needs and goals.

Ultimately, if possible, it’s important to spread your funds across different investment types while being fully aware of the returns and potential risks that property investment can entail.


Interested in investing in properties? Start your journey by browsing newly launched properties and developments in Malaysia.

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