This website here shows a comprehensive comparison of term deposit rates in Sri Lanka.

Currently you can get a 12 month term deposit at a rate of 10.75% with an AA+ rated bank.

Compare this to what I could get in Australia - and you're looking at about 2.25% for a 12 month term deposit.

Now ok - 'Inflation is higher in Sri Lanka' you say.

Looking at this website - we can see that over the last 5 years inflation has swung between 1% and 8% and that it's currently around 5%.

Australia on the otherhand, has been between 1% and 3% and is currently about 1.25%.

Ugh.. ok I think I've answered my own question - it seems like in both cases the term deposit rate is about 2x inflation.

So to turn this into a useful question - is there a scenario where doing a term deposit in a developing country can be considered about similar risk/reward as an index fund in a developed country?

The context is - my partner is Sri Lankan and has savings in Sri Lanka - and it's a question of whether she should just continue with her savings in a term deposit there - or whether it's worth moving that money to Australia and putting it in an index fund.

  • 1
    You should also consider currency risk when taking such decisions if you are to spend money in AUD, then the future (anticipated) exchange rate between that and local Sri Lankan currency(that the savings are denominated at over there) is of the essence as well.
    – Leon
    Jun 21, 2019 at 11:31

1 Answer 1


Fixed Deposits in an AA+ bank are relatively good for safety and liquidity. You can always break it and lose your interest if you need the money. Your capital is mostly safe.

I don't think an index fund has a similar purpose. If you were to need money urgently in the midst of a recession, you would encounter a huge loss if you were forced to sell your fund.

If you don't have any known big expenses coming up, I'd recommend keeping a small amount in a bank account and most of it in an index fund or ETF for growth.

Returns from a bull market will beat interest rates from a bank account. As you noted, interest rates in other currencies rise when financial institutions expect the currency to depreciate.

I plan to keep 10% of my savings in bank accounts for liquidity. As I'm an Indian, I keep it in rupees. The other 90% of the savings I invest in stocks and ETFs for higher growth.

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