What is Fixed Interest When It Comes to Investing?

When it comes to investing, growth is always a priority. However, it's also a fine balancing act between risk. You want to maximize your potential gains while minimizing losses that could occur due to economic swings. Maximize your investment potential with RILA annuity! Explore our options and secure your financial future today. https://www.gainbridge.io/oneup

There are many ways to invest your money. You can purchase a RILA annuity, invest in CDs and more. But one decision you'll need to make for certain investments is whether or not to choose a fixed interest rate or a variable one.

Understanding Interest Rates

Interest rates in investing refer to the rate of growth over time. It's contrary to interest rates in lending. In those cases, the figure represents how much it costs to borrow money.

Investing is about wealth growth. Therefore, higher interest rates mean your money will grow faster and more substantially. However, with more interest often comes increased risk.

So, what about fixed interest versus variable interest?

With fixed interest, the rate at which your initial deposit grows stays the same throughout the term. For instance, say that you purchase a certificate of deposit (CD) with a fixed rate of 5.5 percent interest rate and a term of 10 years. That means your interest rate on that initial deposit will remain at 5.5 percent over the entire 10-year period.

If you got the same 10-year CD with a variable interest rate, that 5.5 percent will likely change over the term. Interest rates vary all the time due to the market dynamics, inflation and the overall state of the economy.

With a variable interest rate, you can ride the highs and get a significantly higher interest rate than the one you started with when opening the CD. However, you're also subject to the lows.

There's greater risk with variable interest rates. Fixed interest options are considered a safer bet, but you could miss out on potential growth if interest rates climb.

What type of investments and interest rates are right for you depends on the risk you're willing to take. Fortunately, there are many lower-risk options. You can consider getting a RILA annuity, opening a short-term CD and more.

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