It is a fact that year after year, the return that can be obtained from a bank deposit is getting lower and lower. According to the Bank of Spain, In the euro area, average interest rates stand at 0,12%, which is the lowest figure ever recorded. It is not surprising, therefore, that savings are shifting to other products. We will explain the associated risks and how not to make a mistake.
Investment in bank deposits declines
The fall in deposits means that deposit holders are redeeming their deposits, either to leave them in an account or to use the money for purchases, or to reinvest it in other financial products. Putting it in figures:
- Nearly 37 billion euros that were invested in reservoir
- There has been an increase in recruitment of investment funds of more than 12 billion euros
The trend seems clear: due to the reduction in guaranteed returns, the average saver is directing his or her savings to non-guaranteed products, The aim is to improve their performance.
The alternative: investment funds
As we say, non-guaranteed options are gaining ground month by month. But are you taking into account the risk taken in investment funds?
This is the big question, and it is up to each individual who puts his or her money into risky products to answer it. The ethics of our profession require that when marketing an unsecured investment product, we must explain the details of how much risk is being taken, what can happen in the worst case scenario, etc.
This is very important because Spain is not a country used to investing in funds, at least not the bulk of its savings, which is what we are currently tending to do.
Tip: assess your risk aversion and tolerance for risk
It is important to be aware of the options available. Banks have their hands tied on the return they can offer, but insurance companies are offering better interest rates on products that at the end of the year give a profit share of the return on their assets. Moreover, we have already seen that for some time now there has been an insurance company that is offering a savings product with profitability 1.20% net of expenses, on a guaranteed basis.
If your risk profile allows you to invest in funds, do so, but diversify. Don't choose a fund and put “all your eggs in one basket”. Make a “basket of funds” to avoid unpleasant surprises.
If, on the other hand, your profile is more conservative, don't risk more than necessary and settle for a return in line with the risk you are willing to assume, knowing that there are interesting options now, as we have said.
Incidentally, savings in insurance companies are reaching record figures, precisely for this reason. 234,963 million euros have already been saved in insurance, which is almost 10% more in a single year.
If you want our Savings and Investment Department help you to know your risk profile as an investor and, in order to choose the product that suits him/her, contact us. With us you will choose between products, not from a single entity, but between more than 20 insurance companies.
