The Best Alternative to Time Deposit

by Gily Tenorio on November 25, 2011

in Mutual Funds, Time Deposit


All of us want the most out of our money. So we tried to look for the best deals when buying things and finding the best bank that gives highest interest rates for savings account or time deposit (TD). In investing, you should be aware of how much your investment will give you after a period of time. I assume you already know how time deposit works and what are the normal interest rates paid for each term. However, if you still don’t know you can read some of my posts about time deposit here or you could go directly to the bank’s website to learn the rates they are giving for TD.

Few Facts About Time Deposit

TD is a deposit product offered by almost all banks in the Philippines. It is insured by Philippine Deposits Insurance Corporation (PDIC) just like an ordinary savings account. The insurance has a maximum limit of Php 500,000 according to law. It is good to invest in time deposit especially if you want security and guaranteed return after the maturity period. However, in some cases, the interest it gives is low that you cannot beat the inflation in the Philippines. You should consider inflation when investing money because inflation degrades money’s purchasing power.

According to the latest study of National Statistics Office (NSO), the inflation rate year-to-date in the Philippines is 4.8%. Normally, short-term time deposit only gives 2-4% interest so you actually lose some money when you invest in TD due to inflation. Anyhow, there is an alternative for time deposit but it is not guaranteed by PDIC. It gives higher return than TD and beats inflation. I’m talking about fixed-income mutual fund.

What is Fixed-Income Mutual Fund and How it Works?

Fixed-income is a type of mutual fund where funds are invested in fixed-income instruments such as treasury bonds and high yield savings account. From its name, you will get an idea that this kind of mutual fund gives steady income as the time goes by, that’s why it is called “fixed income.” It is not affected by the stock market’s volatility since the fund is not invested in it.

Fixed-income mutual fund works like any other type of mutual funds but it is the least risky of all since it is not dependent on the stock market or to the slight change in the economy. It gives a steady income for the investor that normally ranges from 6-15% per year depending on the mutual fund company managing the fund. If you want a fixed income from your money at the same time beat the inflation, you may try to invest in this kind of mutual fund.

However, be aware that the profit of fixed-income MF is not guaranteed by PDIC or even the MF company. It may be lower or higher depending on the performance of the fund. But don’t be afraid on losing money because MF companies follows strict rules on investing and it is managed by professional managers and investors. MF companies in the Philippines are supervised by the Securities and Exchange Commission (SEC) so you will be assure that they are regulated and clients are protected from fraud and scams.



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{ 4 comments… read them below or add one }

Felmer January 22, 2017 at 09:03

Hi Sir thanx 4 d info.may i ask which mf comp.offers best this kind of mf funds.(fixed rate.)


Gily Tenorio January 23, 2017 at 01:27

You may check FAMI and Philequity for their Fixed Income MF. For your info, I have FAMI fixed income MF but not investing for few years now.


john russell January 5, 2012 at 08:56

Good option. But, were the principal amount invested affected by any economic volatility or downturn/or the nosedived stock performance.


learnfe January 5, 2012 at 12:41

Hi John,

Yes the principal amount is affected, it has risk like stocks.


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