Why are “random” deposits bad?
"Random deposits are a bit like playing the lotery - especially if one is frequently chasing ""hot tips"".  You might make it big, but the odds are vastly against you. ""Random"" deposits into various investments won't be optimal, because such ""random"" decisions will not be properly diversified and balanced.  Various investments have different rates of risk and return. ""Random"" deposits will not take this into account for an individual's personal situation. In addition to needing to research individual investments as they are made, investments also need to be considered as part of a whole financial picture.  A few considerations for example: Simply put, random isn't a financial strategy."
I'v actually heard of this before, the idea is that you gamble across the spread. Most of these have a place in a risky asset class in portfolios. Think of it as the little bit of crack you do on the side of your vanilla life. It means someone's getting paid too much. I'd check the sharpe ratio and compare that to similar funds along with their expense ratio. So in some scenarios it's not necessarily a bad thing but being informed is the important thing "Historically, Banks are mandated to take relatively safe risks with their money.  In exchange, they gain a de-facto permission to invent new money.  They have regulations about what mix of assets they are permitted to own.  Real estate speculation will be in a different category than a mortgage to someone with good credit. Second, mortgages with a secured asset are pretty safe almost all of the time.  That person might stop paying their mortgage, but it is secured; when that happens, the bank gets the secured asset (the right-to-apartment or house or what have you). In a sense, the bank loses only if both the person paying the mortgage is less creditworthy than they look, and the secured asset cannot recoup their losses. In comparison, the person paying the mortgage loses if the secured asset cannot recoup their losses. The bank is buffered from risk two fold.  What more, the bank uses the customer to determine what to invest in. Deciding what to do with money is expensive and hard.  By both having a customer willing to put their good credit on the line and doing due diligence on the apartment, the Bank in effect uses you as a consultant who decides this may be a solid investment.  Much of the risk of failure is on you, so you have lots of incentive to make a good choice. If the Bank was instead deciding which apartment where worth buying, who would decide?  A bank employee, whose bonus this year depends on finding a ""great apartment to invest in?"", but the consequence of a bad choice doesn't show up for many years?  The people selling the bank the apartments? Such a business can exist.  There are real estate companies that take money, and invest it in real estate.  Often the borrow money from Banks secured against their existing real estate and use it to build more real estate.  (Notice the bit about it being secured against existing real estate; things go south, Bank gets stuff). The Bank's indirect investment in that apartment in the current system is covered by appraisals, the seller, the mortgage holder, and the system deciding that the mortgage holder is creditworthy. Banks sell risk.  They lend you money, you go off and do something risky with it, and they get a the low-risk return on investment of your loan.  Multiple such low-risk investments provides them with a relatively dependable stream of money, which they give out to their bondholders, deposit account customers, shareholders or what have you. When you take a mortgage out for that, you are buying risk from the bank.  You are more exposed to the failure of the investment than they are.  They get less return if things go really well." I think it's because there are people who build entire wealth-gain strategies around certain conditions.  When those conditions change, their mechanism of gaining wealth is threatened and they may take a short term loss as they transform their holdings to a new strategy. For small amounts I wouldn't be too concerned.   There are two factors I can think of: For relatively small amounts and when dealing with reputable banking institutions there should be little concern of banking with a single bank.  It's what most people do. "They say that banks earn 4 - 5% on deposits, so with lower costs they can give away 2-4%. They cite [this article](https://www.wsj.com/articles/u-s-banking-industry-annual-profit-hit-record-in-2016-1488295836) which says that ""return on equity [for banks] up at 9.32%, the highest level since 2013"". But [net interest margin](https://www.fdic.gov/bank/analytical/qbp/2017mar/chart4.html) is lower (2.5%-4.5%). And that's in a good year.  They elaborate in a blog post:  ""Fed Funds rates are supposed to affect deposit rates that banks pay to their customers, as, after all, deposit is a form of short term loan from depositor to the bank (see the explanation in our recent blog). However, as WalletHub notes in their recent report, it has not actually happened recently. As the report notes, for traditional branch-based banks, savings and checking account rates are virtually unchanged. You are probably getting the same 0.01% in your checking or savings account? Meanwhile, rates on your credit card went up by 0.53% since December 2015.""  ""So why aren’t deposit rates increasing? One reason often cited, is actually the relative decrease in the levels of competition in the U.S. market (as we described in our earlier blog). While there are still thousands of banks in the U.S., 4 control ~40% of the assets and close to half of the assets (loans). The other reason could be, perhaps, that after almost 10 years of getting close to zero in your bank account, you will forget that it could be any different. In fact, bank executives are puzzled why consumers are not “demanding” more on their deposits. You can walk to the branch and “demand” more money from your bank, but you may end up in county jail. The only other viable option is to take your deposits elsewhere, or vote with your feet."" (https://blog.meetbeam.com/draft-why-are-lending-rates-going-up-but-deposit-rates-are-not-76e050b382af)  ""Beam makes money by providing value-added services to our partnering bank and other financial service partners in the banking ecoysystem."" That sounds like they might be selling your data?" Its based on demand and supply and what Bank think the future rates would be. Today Banks in India have a liquidity crunch as the Repo Rates by Reserve Bank of India [Central Bank] are high. Bank want to encourage more people to deposit money and hence are offering higher rates. Banks also believe that once the Inflation is under control, the Central Bank would ease the repo rates. This is likely to happen in a years time. Hence Banks one year down want to lower the Fixed Deposit rates. So essentially they would be at loss if they give higher rates for longer periods. So they are offering the highest rates for a period of year which motivates more people to invest for a year, even if they want to stay invested for long. "Great question. There are several reasons; I'm going to list the few that I can think of off the top of my head right now. First, even if institutional bank holdings in such a term account are covered by deposit insurance (this, as well as the amount covered, varies geographically), the amount covered is generally trivial when seen in the context of bank holdings. An individual might have on the order of $1,000 - $10,000 in such an account; for a bank, that's basically chump change, and you are looking more at numbers in the millions of dollars range. Sometimes a lot more than that. For a large bank, even hundreds of millions of dollars might be a relatively small portion of their holdings. The 2011 Goldman Sachs annual report (I just pulled a big bank out of thin air, here; no affiliation with them that I know of) states that as of December 2011, their excess liquidity was 171,581 million US dollars (over 170 billion dollars), with a bottom line total assets of $923,225 million (a shade under a trillion dollars) book value. Good luck finding a bank that will pay you 4% interest on even a fraction of such an amount. GS' income before tax in 2011 was a shade under 6.2 billion dollars; 4% on 170 billion dollars is 6.8 billion dollars. That is, the interest payments at such a rate on their excess liquidity alone would have cost more than they themselves made in the entire year, which is completely unsustainable. Government bonds are as guaranteed as deposit-insurance-covered bank accounts (it'll be the government that steps in and pays the guaranteed amount, quite possibly issuing bonds to cover the cost), but (assuming the country does not default on its debt, which happens from time to time) you will get back the entire amount plus interest. For a deposit-insured bank account of any kind, you are only guaranteed (to the extent that one can guarantee anything) the maximum amount in the country's bank deposit insurance; I believe in most countries, this is at best on the order of $100,000. If the bank where the money is kept goes bankrupt, for holdings on the order of what banks deal with, you would be extremely lucky to recover even a few percent of the principal. Government bonds are also generally accepted as collateral for the bank's own loans, which can make a difference when you need to raise more money in short order because a large customer decided to withdraw a big pile of cash from their account, maybe to buy stocks or bonds themselves. Government bonds are generally liquid. That is, they aren't just issued by the government, held to maturity while paying interest, and then returned (electronically, these days) in return for their face value in cash. Government bonds are bought and sold on the ""secondary market"" as well, where they are traded in very much the same way as public company stocks. If banks started simply depositing money with each other, all else aside, then what would happen? Keep in mind that the interest rate is basically the price of money. Supply-and-demand would dictate that if you get a huge inflow of capital, you can lower the interest rate paid on that capital. Banks don't pay high interest (and certainly wouldn't do so to each other) because of their intristic good will; they pay high interest because they cannot secure capital funding at lower rates. This is a large reason why the large banks will generally pay much lower interest rates than smaller niche banks; the larger banks are seen as more reliable in the bond market, so are able to get funding more cheaply by issuing bonds. Individuals will often buy bonds for the perceived safety. Depending on how much money you are dealing with (sold a large house recently?) it is quite possible even for individuals to hit the ceiling on deposit insurance, and for any of a number of reasons they might not feel comfortable putting the money in the stock market. Buying government bonds then becomes a relatively attractive option -- you get a slightly lower return than you might be able to get in a high-interest savings account, but you are virtually guaranteed return of the entire principal if the bond is held to maturity. On the other hand, it might not be the case that you will get the entire principal back if the bank paying the high interest gets into financial trouble or even bankruptcy. Some people have personal or systemic objections toward banks, limiting their willingness to deposit large amounts of money with them. And of course in some cases, such as for example retirement savings, it might not even be possible to simply stash the money in a savings account, in which case bonds of some kind is your only option if you want a purely interest-bearing investment." The main reason people go with lower interest accounts is for convenience of having the money in the same institution with other accounts (like checking, auto loans, credit cards, etc.) with their local bank. These online savings accounts are regulated by law to only allow 6 transfers out per month, so for people that need to make withdrawals more frequently, that can also be a factor. If someone has an account like this that is not part of their normal checking account, it can also be inconvenient to wait for an ACH to complete overnight before the funds are available in their main accounts. I certainly use a higher yielding account for my very short-term liquid savings. Remote Deposit usually means a scanner and some software and has a monthly fee associated with it (so it only makes sense for businesses, and even then only some businesses). Chase and USAA allow you to make deposits via your iPhone which is aimed at consumers and has some deposit limits associated with it (checks have to be less than some $$). I've used both.  Remote Deposit is super easy, the software usually sucks, but it's too expensive for personal users ($60/month at citibank).  Chase deposits have worked on my iPhone usually after 2 or 3 tries but that did save me from walking to the bank. "Theres nothing wrong with CDOs or Synthetic ones. What is important is that they are labelled correctly in terms of their risk. You cant be selling risky CDOs as ""safe"" bets.   If the rating agencies and financial institutions rate them correctly then I dont see a problem with it." In my experience Sparkasse or VR Bank have them quite often. They stick out in my mind because when you make a withdrawal you have to reach in to get your money instead of it spitting it out. I'm always afraid its going to chop my hand off. There is nothing conceptually wrong with it.  If you like it that way, go ahead. The only thing to watch out for is bank policies that effectively penalize having many small accounts.  For instance, some banks charge you a fee for checking accounts with a balance below a certain minimum, but will waive the fees for accounts with a higher balance.  You may be able to avoid such fees by judicious management of your funds (or by switching to a different bank), but it's something to be aware of.  (The interest rates on savings accounts also often vary with the balance, making many small balances less efficient than one big balance.  However, right now, at least in the US, interest rates on savings accounts are so low that the difference here is likely to be minimal.) Yep. You know, for banks to use against your deposits which are now legally interpreted as unsecured loans or some such. I don't think we can print big again. Happened in [Cyprus](http://rt.com/business/cyprus-crisis-bailout-deposit-631/). Tinfoil hat is optional. "This article is written by an idiot!!  Risk ≠ failure, risk = possibility of failure  Reward (return) should be commensurate with risk and this is why long-shot propositions should be worthwhile. An example of this could be something like the following; an investment with a 95% chance of success should return about 5% on the investment (1 in 20 risk of loss, 1/20th return on investment for taking the risk) while a long-shot investment with a 5% chance of success should be paying a 2000% return (1 in 20 will succeed but they will pay 20 times the investment if they do).  An investment with a 0% chance of return (that you are suckered into due to ""opacity"") is not an investment, it is being robbed and it should be illegal. WTF is opacity? Lying?"