Today it is more common than ever to find savers or investors who prefer to have their money in a 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 our 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 gasoline and electricity prices, among others, already indicate that we are returning to inflationary times. Life is more expensive and, with the same money, we can afford to buy fewer goods.
Conclusion? We must invest our savings to avoid the loss of purchasing power.
But, if I can’t put my money in deposits because they offer little return, what options do I have?
Alternatives where to focus our savings
Banks are offering investment funds to reinvest the maturities of these deposits. It is an option, but we must be clear that we are taking a risk when we put our money in non-guaranteed products.
We anticipated some time ago these dangers and how the saver was acting with the article: “Family savings exit deposits due to low profitability”.
We will see that there are less risky alternatives to choosing only a single investment fund.
Tips based on your current situation
We believe these suggestions are important to better understand how to save.
Periodic savings
If you are more “ant-like” and generate savings every month, there are products called “periodic” savings (such as: PIAS or SIALP, for example).
They work like this: at the end of the month, a charge of 40-100-500 euros (the amount you decide, depending on your economic capacity) is made. The same is put into a guaranteed product or linked to investment funds, but which, of course, is better than having it tied up for months and months.
Guaranteed products with high profitability
For some time now, there has been an insurance company offering a net return of 1.20% (net is after deducting expenses). This is very interesting:
- 10,000 generates a yield of 120
- By putting in 100,000 euros the return is 1,200 euros
- If you put in 1.000.000 ¤ the yield reaches 12.000 ¤.
For the alternatives that are now available in banks and even in other insurance companies, this option is very, very good.
Investment fund portfolios
If you currently have enough 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 minimize exposure in a given sector.
To conclude: in a period of inflation, if we do not obtain a return on our savings, we are losing purchasing power. Basically, we have less money than before.
If you would like our Savings and Investment Department to help you choose the product that best suits you, please contact us and we will be happy to assist you.
