Saving account or investment portfolio – What is better?

Should you save on a bank account at negative interest rates, or should you invest in riskier assets? Several years ago the idea of ‘negative’ interest rates was laughable. Surely that was just some economic ‘theory’ that economists discussed during their birthday party right? No.

It looks like the race to the bottom has continued and now has officially entered negative territory. Unofficially, if you take into account the increase in the cost of living, negative returns already existed for several years. Looking forward it is unlikely that interest rates will turn positive any time soon.

So, why should you keep your money in a bank to see its purchasing power erode? You most likely are doing it already. It’s not logical, but most people simply are not aware of any suitable alternatives and/or act out of habit.

Save or invest?

International financial planning theory suggests the following:

  • keep one month worth of expenses on an instant access account
  • three to six months’ worth of expenses in highly liquid low-risk investments
  • the rest of your capital should be invested with a longer term horizon and generate returns for you.

There are several ways to invest, for instance via regular contributions for your pension, or via a single lump-sum investment.

The question a lot of our clients have is ‘where do I invest?’ and ‘in what do I invest?’ We cannot advice on these questions without understanding your needs, so please do tell us more about your situation. We’d love to hear from you about your need to save or invest during times of negative interest.

If you would like to read up on some of our ideas or learn more about investing in general why not check out the relevant articles in the knowledge center? Or, save yourself some time and contact our founders directly. It’s easy to discuss your options with them at a time convenient for you. We would like to hear from you so that we start to understand your personal situation and offer you some practical recommendations.