If you have a lump sum of over $100,000, you may decide to put it in a term deposit as a secure way of holding your money for a period of time while it earns interest.
Interest rates for term deposits over $100,000 tend be relatively generous because it’s a significant sum of money. The longer you’re willing to keep it deposited, the higher the interest rate is likely to be as well.
However, investing in a term deposit isn’t your only option. Here are some of the potential benefits and drawbacks of investing over $100,000 in a term deposit, as well as some other investment options to consider.
Advantages of a term deposit over $100,000
- High interest rate – The interest rate for deposits over $100,000 are likely to be relatively high, as an incentive for you to keep a significant sum of money in a bank for an extended period.
- Low risk – The interest rate on a term deposit is fixed and your money isn’t exposed to the fluctuations of the market, so it won’t lose value.
- Deposit is guaranteed – If you’ve deposited your money in an authorised deposit-taking institution (ADI), it’s protected by the Australian government if something happens to the ADI. This is the case for deposits up to $250,000.
- Low maintenance – Once you’ve deposited your money, you can set it and forget it while it passively earns interest until maturity.
Disadvantages of a term deposit over $100,000
- Money is locked in – If you need to access your money or another investment opportunity arises before the end of the term, it may take some time to access it and you’ll probably have to pay a penalty fee.
- Returns could be modest – Compared with other investment options for amounts over $100,000, the earnings from a term deposit could be relatively low, even with a high interest rate.
Other ways to invest $100,000+
Term deposits are one of the safest ways to invest more than $100,000, but as we’ve seen above, they do have their downsides.
Some of the other popular investment options for $100,000-plus investments include the following:
- High-interest savings account – These accounts earn a higher-than-average interest rate, but the interest rate is variable (i.e. it can change) and your money isn’t locked away for a specified time period. Some savings accounts also come with minimum deposit requirements and maintenance fees.
- Managed fund – With a managed fund, an investment manager buys and sells shares or other assets on your behalf. This type of investment exposes you to the volatility of the market, so it tends to be riskier.
- Passive fund/index fund – Contrary to a managed fund, this fund simply involves buying a portfolio of assets that imitates an entire index (the All Ordinaries, for example) and generates a return comparable to that index. Management fees are usually lower than for an actively managed fund.
There are many other ways to invest, and each comes with its own benefits and drawbacks, so it’s worth doing some research to choose an investment option that suits your needs and goals.
How do you find the best interest rates over $100,000?
If you’ve decided to go with a term deposit as a low-risk, low-maintenance investment for your money, take a look at RateCity’s term deposit comparison tool.
You can enter a minimum deposit amount (over $100,000, for example) and a minimum term to see results tailored to your preferences.