What are dynamic bank deposits?
The Webinar Universe platform gives a definition: a dynamic deposit is a type of bank deposit that is distinguished by specific saving rules. It is important that the interest rate on the deposit is variable and that the funds deposited on the deposit can be withdrawn at any time without the risk of losing interest. The interest rate on a dynamic deposit typically changes every month and can go up or down, and this potentially gives you the chance to earn more interest than other types of fixed-rate deposits.
A dynamic deposit is also beneficial in another respect – says an expert from Webinar Universe training. You can withdraw funds from it at any time and receive interest for the previous saving period. On the other hand, early termination of an ordinary term deposit usually results in the loss of the right to interest.
Dynamic deposit is also often referred to as progressive – important details can be learned during online training on Webinar Universe – an educational platform. This happens when the variable interest rate on the deposit increases with each subsequent saving period. In a progressive deposit, the interest rate always increases during the term of the agreement, while in a dynamic deposit it can both rise and fall. A dynamic deposit can therefore be progressive, but this is not always the case.
How to invest in dynamic bank deposits?
Investing in dynamic bank deposits is a process that requires a certain amount of capital. O The best ways to invest are in the online courses of the Webinar Universe learning platform.
Here are some steps you can take to invest in dynamic bank deposits:
- Savings are needed: Regular savings growth, including deposits, ensures financial security.
- Understanding what bank deposits are. A deposit is a deposit that allows you to deposit funds in a bank and makes them multiply safely.
- Decide on your investment goals: You can invest in three main goals. The first one assumes the preservation (freezing) of the financial resources held, the second assumes an increase in the invested funds, and the third gives the possibility of receiving a steady income.
- Choosing the right deposit: There are many types of deposits on the financial market, which differ in their specificity and purpose. In order to choose the right banking product, it is worth reading the offer carefully.
- Investment: After deciding how much money an investor can invest and what type of deposit they want to open, they can apply to open a deposit with the bank of their choice.
However, it is important to remember that every investment carries a certain risk. There are also risks associated with dynamic deposits. It is:
- Interest rate volatility risk: The interest rate on a dynamic deposit is variable and can go up or down. If the interest rate falls, the potential profits may be lower.
- Risk of freezing funds: A deposit is a freezing of funds for a given period. While it is possible to withdraw funds, it can affect the investor's liquidity.
- Market risk of the underlying asset: In the case of investments in derivatives, the risk is related to adverse changes in the level or volatility of the rates, prices or value of the underlying instrument on which the instrument is based.
Therefore, it is worth conducting a risk assessment for dynamic bank deposits. It should cover several key aspects:
- Interest rate volatility: Dynamic deposits have variable interest rates that can go up or down. Therefore, there is a risk that interest rates may fall, resulting in lower profits.
- Inflation and tax: Even if the deposit generates profits, after adjusting for inflation and tax, these income may not compensate for the destructive effects of inflation. For example, holders of annual bank deposits ending in 2023 receive nominal profits, but in real terms (taking into account inflation and tax) they have suffered a loss from this form of saving.
- Bank stability: The assessment of a bank's financial health, based on data included in the financial statements and non-reporting information, is important for assessing the risk of a bank's insolvency.
Before investing your funds, it is worth taking advantage of the online training offered by the learning platform. Pros and cons
Advantages of dynamic deposits:
- Variable interest rates: Dynamic deposits have variable interest rates that can go up or down, potentially giving you the chance to earn more interest than other types of fixed-rate deposits.
- Flexibility: You can withdraw funds from a dynamic deposit at any time and receive interest for the previous saving period.
- Security: Bank deposits are one of the safest and most popular ways to save. They enable fair and safe savings with inflation protection.
- Potentially higher returns: Dynamic deposits can offer higher interest rates than other savings products.
- Availability: You need a small amount of capital to open your bank deposit. More people can apply to open such an investment.
- Dynamic bank deposits, like other financial products, have their drawbacks:
- Interest rate volatility: Dynamic deposits have variable interest rates that can go up or down. If the value of a financial instrument falls, the interest rate on a dynamic deposit also falls, which means that the investor can earn less money than with a standard fixed-rate deposit.
- Freezing of funds: The money accumulated on the deposit is at the disposal of the bank, not the customer.
- Risk of loss: Investors should be aware that they may lose some or all of their invested money if the value of a financial instrument falls or does not increase at all.
- Conditions: Some banks offer high interest rates on dynamic deposits, but they are often associated with certain conditions, such as a minimum investment amount or a minimum deposit duration.
- Costs and fees: It's also a good idea to check what the costs and fees are associated with investing in a dynamic deposit to avoid unpleasant surprises.
The advantages of dynamic bank deposits include variable interest rates that have the potential to yield higher returns, the flexibility to withdraw funds without losing interest, security as a banking product, potentially higher returns compared to other savings products, and accessibility to a wide range of people. The disadvantages of dynamic bank deposits are interest rate volatility that can lead to lower returns, freezing of funds that can affect liquidity, risk of loss if the value of the financial instrument decreases, and potential costs and fees. Risks associated with dynamic bank deposits include interest rate volatility, inflation and tax, bank stability, and underlying market risk. The Webinar Universe training platform has dedicated online training on this topic.