My savings matured: should I put it in a deposit or bonds?
My 3-year installment savings of 12 million won matures next week. Interest rates are in a weird spot right now, so I'm trying to decide where to put it.
I already invest in stocks, so I want to keep this in safe assets, but bank deposit rates are too low, and I've never bought bonds before, so I don't even know how to buy them. If I won't need the money for 3 years, is a deposit just the answer?
8 answers
These days there are even deposit rates in the mid-3% range, so if you look around for special offers, banks aren't bad either.
If you're new to bonds, just stick with deposits, seriously.
Well, isn't the idea that 'if you won't need the money for 3 years, a deposit is the answer' a bit outdated? Once you factor in inflation, the real return could even be negative. If you just want to play it safe, that's one thing, but it's a stretch to call it 'the answer.'
I was in a similar situation last year, and if it’s your first time with individual bonds, the barrier to entry is definitely high. Even when you search for over-the-counter bonds in a brokerage app, you get stuck at the terminology, and there are minimum purchase amounts. I ended up putting half in a short-term bond ETF and half in an MMF. The returns were only slightly better than a deposit, but being able to pull the money out whenever I needed it was huge. If you’re thinking of locking it up for a fixed 3 years, a deposit is actually more convenient.
Bonds are structured so their prices rise when interest rates fall, so now could be a peak buying point. If you're not confident about where rates are headed, just sticking with deposits is easier on the mind.
Ah, I don't know—I've just been agonizing over the same thing for three weeks lol
Doesn’t it seem a bit off to say bank interest rates are too low these days? If you mean savings accounts, sure, but plenty of places offer time deposits above 3%. Did you do some comparing before coming here?
With 12 million won, it's an awkward amount if you want to buy bonds directly. Government bonds are issued in units of 1 million won, so it's possible, but hard to split across multiple issues. Another option is to just keep it in a high-yield parking account and switch to a deposit when rates go up. For reference, the 50 million won deposit insurance limit is calculated separately per bank, so even if you put it all in one place, with your current amount it doesn't matter.