Today, it is more common than ever to find savers or investors who prefer to have their money in current account, to have liquidity. The reason is clear: the interest rates offered by financial institutions are the lowest in living memory. Let's see why and in which cases we are making a mistake by having the money tied up.
Current market situation
Recently, we have encountered flat or even negative inflation. What this means is that, although our savings are not earning us any interest, we are not losing purchasing power.
The latest data, due to the rise in petrol and electricity prices, among others, already indicate that back to inflationary times. Life is more expensive and, with the same money, we can afford fewer goods.
Conclusion? We must invest our savings to avoid loss of purchasing power.
But I can't put my money in deposits because they don't offer me much return, what are my options?
Alternatives on where to focus our savings
Banks are offering investment funds to reinvest the maturities of these deposits. This is an option, but we must be clear that we are taking a risk when we put our money into unsecured products.
Some time ago, we anticipated these dangers and how the saver was acting with the article: “Household savings are moving out of deposits because of their low profitability”.
We will see that there are less risky alternatives to choosing only a single investment fund.
Advice based on your current situation
These suggestions seem important to us to better understand how to save.
Periodic savings
If you are more “little ant”.” and you are generating savings every month, there are products known as "de periodic“ savings” (such as: PIAS o SIALP, for example).
They work like this: at the end of the month, a charge of 40-100-500 euros is made (the amount you decide, depending on your financial capacity). This is put into a guaranteed product or one linked to investment funds, but it is certainly better than having it tied up for months on end.
Guaranteed products with high returns
For some time now, there has been an insurer offering a net return of 1'20% (net is after expenses). This is very interesting:
- 10.000 generates a yield of 120 €.
- With €100,000, the return is €1,200.
- If you put in 1.000.000 € the yield is up to 12.000 €.
For the alternatives that are now available from banks and even other insurers, this is a very, very good option.
Investment fund portfolios
If you currently have a lot of money saved in your account without doing anything with it, we can be a little more “daring” and opt for products composed of a portfolio of funds (so that we diversify the investment), without concentrating all our savings in a single destination. In this way, we spread it out to minimise exposure to a particular sector.
To conclude: in a period with inflation, if we do not obtain profitability of our savings, we are losing purchasing power. Basically, we have less money than before.
If you want our Savings and Investment Department help you choose the product that best suits you, contact us and we will be delighted to help you.
