In recent weeks and months, we have heard a lot about the money market crisis, a series of bankruptcies, and huge stock price falls. Equity prices are at multi-year lows, mutual funds are also yielding negative returns, and it is difficult to make a good investment decision at these times. Here are some options to keep your money safe.
Many people probably think that their money is the safest place under the pillow these days. Of course, this is not the case, as savings are thus inflated and lost in value. Instead, for example, we recommend short-term interest rates on bank deposits, currently around 13.5%, or government securities, with annual returns of 12.5-13%.
For those who currently have discount treasury bills in their portfolio, it is worth selling and buying the same maturity government bond instead, as it currently provides a higher yield. We do not recommend buying gold or real estate. The ever-popular capital and possibly yield-protected funds have become more and more popular now, but before investing, it is a good idea to find out the exact designs and look at a few things. Investors with a higher risk appetite may start buying underpriced equities, but this is more likely to generate solid returns in the long run, and even severe falls in the short run. For the Manchester Mortgage Broker this is the best option.
Bank Deposit
- Since raising the central bank base rate, banks have been attracting depositors with increasing promotional interest rates. At the moment, the odd situation is that they offer interest rates that are higher than government securities yields. The reason for this is that due to the crisis of confidence, it is more difficult and more expensive to obtain credit in the interbank market, thus reducing the shortage of funds. Since the beginning of October bank deposits in Hungary are covered by an unlimited state guarantee, it is safe to invest. Usually it is only possible to calculate in the short term, as banks constantly change the interest rate paid on special deposits (every 3 to 6 months).
- The disadvantage of bank deposits is that if we need money in the meantime and have to make a deposit, we will have to lose interest, as banks will only pay a fraction of the interest. Also, special rates apply only when you open a new account or when you save money.
Discount Treasury bill, government bond
Currently, the yield on the 3-month T-bill is around 12.2%, which is slightly lower than the special-interest bank deposits. The advantage is that the maturity can be chosen almost every week, so we can adjust the maturity. In addition, if you want to redeem or sell it before maturity, you will not necessarily lose your accumulated yield. It is theoretically risk-free, as the repayment is guaranteed by the Hungarian state. We prefer to buy it on the secondary market so you can earn a higher return than buying it from a bank or broker.
The disadvantage is that we may have a loss in the event of redemption before the end of the term. This happens when interest rates rise in the meantime, and the treasury bills we own are depreciated.
