How a fixed-term investment plan actually works

A fixed-term investment plan is a simple instrument wrapped in language that often makes it sound more complicated than it is. You commit an amount for a defined period, the position is managed for you, and at the end of the period the capital comes back. What happens in between is worth understanding properly.

The four things that define a plan

• Term. How long your money is committed. On MGG this runs from 30 days to a full year.
• Risk band. A description of how wide the range of outcomes is, from low to high.
• Minimum and maximum. The size of position the plan will accept.
• Return structure. How and when any return is paid: at maturity, or in instalments through the term.

Everything else about a plan follows from those four. A longer term with a wider risk band carries a larger modelled return precisely because the exposure behind it is more concentrated and more volatile.

How value accrues

On MGG a plan's value accrues steadily from the day it starts toward its modelled value at maturity. If a 90-day plan is modelled at a 12.8 per cent return on a $10,000 position, the maturity value is $11,280, and the daily accrual is that $1,280 spread across the 90 days.

That smooth line is a modelling choice, and it is worth being explicit about it: real managed positions do not accrue in a straight line. They move around, sometimes sharply, and can be worth less than you put in. The straight line is how the plan is described, not a claim about how markets behave.

Auto-reinvest

Auto-reinvest means that when a term ends, the original amount immediately starts a fresh term on the same plan, and the accrued return goes to your available balance.

It is useful when a plan is doing a job you want it to keep doing, and it saves you having to remember a maturity date. It is off by default on MGG, deliberately: a setting that quietly re-commits your money for another year is not something that should be switched on for you.

Questions worth asking about any modelled return

Whenever a platform shows you a return figure, including this one, these are the questions that tell you what it means.

• Is it a projection or a result? A modelled figure describes an expectation. It is not a record of what happened.
• Over what period? A percentage without a term attached is not a number you can compare to anything.
• What is the downside? If only the upside is described, the description is incomplete.
• What happens if you need the money early? Terms and early-exit rules matter more than the headline rate.
• Who bears the risk? Unless something explicitly says otherwise, it is you.

On MGG every plan return is labelled as modelled, because that is what it is. The figure describes how the plan behaves across its term, and it is shown next to the plan's risk band rather than on its own.

Seeing it for yourself

The return calculator on the investing page lets you put an amount against any plan and see the modelled maturity value, the daily accrual and the date the term ends. The plans page compares all four side by side.