Fixed deposit accounts vs Stocks

Posted by Felix Okoli on Tuesday September 3, 2013 at 10:4:16:

Is it better to invest in a Fixed deposit account or in the stock market? Are stocks a better form of investment than Fixed deposit? Well both of them really do have their advantages and disadvantages and I would just want to write about it here.

A fixed deposit account is a type of savings account held in a bank that offers a higher interest on savings and are insured by the NDIC to a certain limit.

Stocks are ownership of a company which can be traded on the capital market. People who own stocks are called shareholders and they are entitled to benefits from dividends and capital appreciation.

Advantages of Fixed deposit over stocks
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- Returns on FDs are certain unlike stocks which may be a profit or loss
- Fixed deposit investment are held by strong banks which are less likely to fail and in case they do, they are insured by the NDIC but stocks are not insured
- Fixed deposit account can be opened within 24 hrs but stocks take some time to be acquired and depends on trading or allotment
- A Fixed deposit account is available on a daily basis but stocks are not always available
- A fixed deposit account can be closed anytime but stocks cannot be sold anytime unless there is a ready buyer

Advantages of stocks over Fixed deposit account
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- Compared to Fixed deposit, stocks can earn a higher return on investment. At times it can be over 30% p.a
- Stocks continually pay an annual interest in terms of capital appreciation and dividends when declared
- Stock investment can be held for a much longer term than fixed deposit which expire after 1 year
- Investment can be made in Stocks with little capital unlike a Fixed deposit account. You can buy stocks with at little as N10,000 but FDs require above N100,000 in Nigeria

Which one would you rather invest in? Well, both of them really do pay well in the long term if you ask me, however, FDs offer a much safe guarantee.

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Re: Fixed deposit accounts vs Stocks Reply by patrick on Friday September 6, 2013 at 13:24:1:

Where and how can I invest in stock? I would love to be enlighten on this




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Re: Fixed deposit accounts vs Stocks Reply by Felix Okoli on Friday September 6, 2013 at 13:24:1:

You can invest in stocks in 2 ways:

- Through the stockbrokers (Secondary market)
- Through the banks (Primary market)

The secondary market is where you can invest in stocks on a daily basis if you want but you need a stockbroker to do that for you and they charge a small commission for it.


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Re: Fixed deposit accounts vs Stocks Reply by joseph ayanfeoluwa on Monday November 18, 2013 at 1:19:56:

how do i know a stock thhat is doing well




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Re: Fixed deposit accounts vs Stocks Reply by Felix Okoli on Monday November 18, 2013 at 1:19:56:

If the price is going up gradually, it's a good sign. Also if they are paying consistent dividends. You can also monitor the company's performance and investment. If they are growing and diversifying, it means the company is doing well. To monitor a stock, you can study their performance at the NSE and their quarterly reports.


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Re: Fixed deposit accounts vs Stocks Reply by Mike on Tuesday November 26, 2013 at 20:31:6:

Hw do i get the services of a stock broker




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Re: Fixed deposit accounts vs Stocks Reply by Felix okoli on Tuesday November 26, 2013 at 20:31:6:

Visit the Nigerian Stock exchange office or website for a list of registered stock brokers.


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