Savings accounts – not what they used to be. Why are they approaching zero?
Savings accounts aren’t what they used to be. A couple of years ago their interest rates reached almost four per cent, some of the banks then having entered Czech market even one-upped each other to offer a higher interest. It has also been several months since a message might land in our inbox, saying that interest rates will be increasing. Nowadays, they are floundering just above zero and very likely they will reach it eventually. The possibility of their going negative cannot be ruled out, either. In such case, an account would no longer be ‘saving’ but ‘spending’ – it would start giving your money off of its own accord.
Formerly, a similar situation could be solved by a term deposit, their interest rates don’t, however, by far reach three percent so giving up your money for several year only to earn a couple of hundred crowns doesn’t look like such a good idea after all. If the reader doesn’t have millions at their disposal but they are more of a do-it-yourself saver, where to go to get an interest higher that only one percent?
Expert economists and financial analysts generally agree that mutual funds are a relatively easy and secure solution. Their advantage is primarily the lack of necessity to understand investing. If we choose a fund with a low risk factor, its revenue won’t be the highest, on the other hand, it will be certain. We can also take a bit of a risk, in such case ten of more percent may come back, but it could take many years. It is advisable not to panic should the fund suddenly drop into unfavourable values.
Another option is using a pension fund. Revenue is certain here, too, similarly to mutual funds, one doesn’t have to understand virtually anything but a pension fund doesn’t require any initial outlay at all. There is even an extra bonus – the state will reward you with another couple of percent for your reasonable financial management. This can, nevertheless, be the sticking point. The government could just as well change their minds about this reward and you have only locked your money away in a safe for decades.
This Christmas Day’s hit will quite likely be stocks and their dividends. European and Czech companies are currently fashionable, economists are rather excited about ČEZ (Czech Energy Works). Its stocks’ revenue climbs up to 10%. Asian countries, experiencing a seemingly unstoppable growth, should be, however, counted in as well. The revenue there is expected to be even higher but not sooner that in several years and it will probably pay off to wait a little for these volatile markets to stabilise.
In conclusion, it is obvious that even though patience is the key to all success, no investing is risk-free. As a result, it is plausible that it would be best to invest customarily into material wealth, be it real estate or precious metals. In the light of money shortage on all fronts, the most certain solution might be hiding your cash mattress – the only place where it will surely not lose its value.