Navigating the world of investments can be daunting, especially for newcomers. In Chile, though, simple and accessible options exist, such as term deposits. These offer a straightforward way to grow your money by placing it in a financial institution and earning interest over a fixed period.

What are Term Deposits?

The Commission for the Financial market (CMF) defines term deposits as sums of money delivered to a financial institution, to generate interests in a certain period of time. This definition underscores their reliability and ease of understanding, particularly for novice investors.

BancoEstado: A Stepping Stone to investing

bancoestado offers term deposits with low minimum investment amounts and flexible terms, starting from just seven days. This allows Chileans to gradually enter the world of investing, aligning with their individual financial circumstances.

Moreover, BancoEstado provides convenient access through online banking and its mobile application, BancoEstado Móvil. Term deposits can be made in both Chilean pesos and Unidades de Fomento (UF), a Chilean inflation-indexed unit of account.

Pesos vs. UF: Understanding Profitability

The primary difference between peso and UF deposits lies in their profitability.With peso deposits, the final amount is fixed and known from the outset. However, in the deposits in UF, profitability is adjusted according to the variation of the UF throughout the period of the deposit, which allows to protect the purchasing power against inflation.

simulated Returns: Investing $500,000 in BancoEstado

Let’s examine potential returns on a $500,000 peso investment across various terms:

1. Fixed term deposit at 31 days: Investment of $500,000 with an interest rate of 0.4030%. At the end of the deadline, the total to be received is $502,015 with a $2,015 gain.
2. Fixed term deposit at 60 days: Investment of $500,000 with an interest rate of 0.7800%. At the end of the deadline, the total to be received is $503,900 with a $3,900 gain.
3. 90-day fixed term deposit: Investment of $500,000 with an interest rate of 1.700%. At the end of the deadline, the total to be received is $506,000 with a $6,000 gain.
4. Fixed term deposit at 122 days: Investment of $500,000 with an interest rate of 0.4030%. at the end of the deadline, the total to be received is $507,727 with a gain of $7,727.
5. Fixed term deposit at 180 days: Investment of $500,000 with an interest rate of 0.7800%. At the end of the deadline,the total to be received is $511,400,with a $11,400 gain.
6. Fixed term deposit at 364 days: Investment of $500,000 with an interest rate of 1.700%. At the end of the deadline, the total to be received is $523,054 with a gain of $23,054.

As the investment period extends, yields generally increase due to higher interest rates.

Crucial Considerations

It is crucial to remember that term deposits do not allow the anticipated withdrawal of capital. Investors must wait until the term expires to access their invested capital and accrued interest.