Saving or saving, that is the question

It seems inappropriate to talk about savings in the middle of a pandemic crisis, which is already an income crisis for many families, but it is at the most demanding times that the most important decisions are made.

The reflection on the importance of saving is revived annually on World Savings Day, 31 October.

It seems inappropriate to talk about savings in the middle of a pandemic crisis, which is already an income crisis for many families, but it is at the most demanding times that the most important decisions are made.

Saving is always a good decision. It may just be put aside some money, but with interest on bank deposits at historically low levels, the old time deposit solution is not attractive. More attractive are other options such as savings certificates, treasury bonds, investment funds, shares or bonds, although not all that light is gold.

Despite the low profitability, bank deposits have guaranteed capital security of up to one hundred thousand euros, by legal imposition, so dividing the money by banks in tranches of one hundred thousand euros can reassure the most conservative savers. And they can also take advantage of promotional term deposits that offer rates above the market average for new customers, knowing that the solution is limited to banks operating in Portugal and obliges them to open accounts with new banks frequently, as the term is usually very short. duration of this campaign interest.

With low risk and profitability above time deposits, savings certificates and treasury bonds are outlined, suitable for those who want a medium-term solution, with the rules of maturity, redemption and benefits associated with public debt securities to depend on the longevity of the investment.

With greater risk, the possibility of higher return and total capital losses, investment funds, shares and bonds are located.

Although there are investment funds with guaranteed capital repayment, this is not the result of the law. Investment funds are collective investment organizations whose assets are represented by units and whose profitability varies depending on the value of the assets in which the fund invests (real estate, securities, indices, etc.) and which are mandatorily included in the documentation previously made available. to the investor; therefore, in investment funds there are no surprises regarding the assets to which the participants' money is invested.

The shares carry a risk of total capital loss with the hypothesis of a negative change in the share price. In order to invest in shares, there are two golden rules: to know the history of the companies in which you invest and not to panic (not to sell) once the price goes down. And it is possible to invest in shares with greater security through equity funds, managed by professionals and with tight rules on risk diversification, information to investors, etc.

Investment in bonds is not common in Portugal, except for investment in bonds of football clubs. Bonds are debt securities that companies issue, have a default risk (credit risk), and the higher the rate offered, the greater the associated risk. Here too, to mitigate risk is to study companies and associated documentation or invest through funds (in this case, bond funds).

Saving and investing is not easy, but it is available to everyone with small savings and clear information. Saving is needed more than ever. And if the fear of these times weighs and paralyzes, remember that the biggest weight in the world is empty pockets.

The author writes according to the old spelling.

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