Why fixed deposits are preferred over bonds

The popularity of fixed deposits (FDs) exceeds bond investments in Bangladesh. Numerous elements such as risk aversion together with financial literacy and institutional factors result in this phenomenon.

Research data indicates that Bangladeshis view fixed deposits' risk levels as lower than those of bonds by 60.6 per cent. Fixed deposits provide guaranteed returns and delivered better safety than corporate bonds alongside other bond risks.

Bangladeshis mainly prefer FDs since these deposits provide higher liquidity compared to bonds. The power to access FDs remains easier than the restrictions that bonds enforce on their duration. The study states that 48.5 per cent of survey participants consider FDs to be more liquid than bonds.

The trust level among Bangladeshis regarding banks institutions remains extremely high. FDs gain their status as dependable investments because Bangladeshis have faith in banks resulting in 15.2 per cent of people investing in FDs because they trust banks.

In general, Bangladeshis tend to avoid taking investment risks. The insufficient financial literacy levels in Bangladesh require greater attention according to these survey results. The development phase of the Bangladeshi bond market remains at its infancy according to the evidence.

Md Al Imran

Student

North South University

al.imran01@northsouth.edu