alternatives to current accounts
Doubts about the stability of the banking system. Caught between fighting inflation, the path is more difficult for central banks than expected, and the uncertain impact of monetary tightening on the economy. This, in turn, makes the earnings trajectory and stock price dynamics vulnerable. These are the unknowns that fuel today the temptation to seek refuge in liquidity: to turn away from the markets – and especially from the stock exchanges – in anticipation of an improvement capable of restoring investor confidence. The good news is that liquidity today, unlike a few months ago, is paying off. Not in the current account, where, on the contrary, cash is subjected to a continuous and inexorable erosion of purchasing power due to inflation, at a rate of nearly 9%, on an annual basis. However, there are three alternatives for those who want to put their liquidity to good use: deposit accounts, cash funds, and short-term government bonds. Warning: here too inflation hurts, as it really is in all financial assets, stocks, bonds, currencies and raw materials. But at least the damage is a little less, thanks to yields that are much more competitive than they were a few months ago, thanks to the intervention of the European Central Bank, which raised reference rates by 3.5 percentage points, starting last July.
Comparing investment and saving
What are the best tools for making money back and minimizing risk? Economy affiliate courier Comparing different options, examining the best money market funds, deposit accounts that today offer a more attractive return and a selection of government bonds with maturities of less than 18 months, suitable for interpreting the current market stage in a defensive key, without giving up some performance. The basic premise is that these are solutions with different properties, and therefore also suitable for different uses. Cash funds, for example, are the right tool for investors who want to position themselves only temporarily on liquidity, waiting for market conditions to make a return on riskier and potentially profitable asset classes, such as stocks, more attractive. So it’s the most efficient way, if you want to keep a liquidity reserve ready to invest, quickly, as new opportunities arise.
Deposit accounts
Deposit accounts, on the other hand, are savings products, not investments. The most interesting returns here are on 5-year stocks, with aggregate rates of up to 4.5%.Not bad, one might say, if one considers that BTP for the same duration today yields 3.4%. These long maturities and the presence of a bond – which in some cases can be “unclamped” for a penalty in terms of accrued interest – nevertheless make the deposit less suitable for “tactical” parking, which serves as a precursor to new investments. Moreover, it is not certain that the paid-up account and the deposit of securities used for investments are in the same bank, which will add another step, in addition to the possibility of closing the deposit account, once its function is completed. The problem does not exist, on the other hand, if short-term government issues are purchased directly from one’s deposits, with a view to future investment in stocks or managed savings instruments. “In this case, however – notes Rocco Probo, analyst at the Consultique research office – we need to take into account the possible fluctuation in prices, albeit modest, associated with the dynamics of interest rates or the evolution of country risks.”
Wake piggy banks restricted for up to 5 years
A few months ago, the interest that some banks pay on deposit account balances became more attractive. “It’s a market in great turmoil,” says Paolo Benazzi, general manager of Sostariffe.it. The most interesting offers, often in promotion for a predetermined period, come from small emerging banks: “They are above all the ones who struggle on this front, proposing progressively more attractive terms, while the ECB raises interest rates,” says Benazzi. In this age of tension in the banking channel, the question is inevitable: is it trustworthy? It should be noted that amounts deposited in current and deposit accounts are guaranteed up to 100 thousand euros, for each credit institution and depositor, through the Interbank Deposit Protection Fund. This means that if the account is jointly owned, the security is double. Â “Below 100 thousand, it is not appropriate to question the solidity of the institution. Above, though, it makes sense to look at equity ratios. We also monitor the overall levels of non-performing loans, non-performing loans and also the company’s profitability: it has nothing to do with solvency, but it could cause some problems in the long run, ”says Rocco Probo, analyst at Consultique .
Choosing to keep large sums when depositing is more frequent than you think. Increasing. “Simulations conducted on our portals indicate that there is a large number of people willing to associate a significant part of their savings: 14% of searches concern amounts between 90,000 and 100,000 euros. The third focus is on maturities of more than 36 months and up to 5 years,” Benazi says. Interest accrued on a deposit account is taxed at 26%, as opposed to a 12.5% tax on government bonds and money market funds that invest in short-term government bonds. In addition, stamp duty (0.2% on amounts deposited, for natural persons) must be considered. Except where the bank takes over directly, on a promotional basis.
How to choose the right car awaiting investment
To manage liquidity, from an investment perspective or rather a strategic position while waiting for one’s money to be invested in activities with a longer time horizon, Money market funds are the most effective tool, provided the objective is to maintain a defensive position over a more or less large portion of the portfolio, waiting for new opportunities to emerge in the markets.: Here, in fact, the times of switching, that is, the withdrawal of investment from the cash fund and the subsequent reinvestment in other financial assets, are much faster than those who have to rely on the deposit account as a reservoir of liquidity. Even in this case, a distinction must be made between: «There are cash funds that invest in short-term government bonds and others that have repurchase agreements in force instead (contracts in which the seller sells a spot price for money, one or more securities, which it undertakes to repurchase on a date futures at a predetermined price. The former instruments are subject to small fluctuations associated with interest rate risk and state risk, and the latter are not. To distinguish between them, it is enough to read the description of the investment product, ”recalls Rocco Probo, analyst at Consultique.
How much money can earn today? Â « Some assumptions can be made, especially for products based on repurchase agreements, as they reflect the ECB’s deposit rate, which is currently 3%. If this criterion remains constant over the next twelve months, it will be equal to the fund’s total implied return. In the event of an increase in rates, on the other hand, the yield will also grow, at least for the part of the year that will take into account the new reference rates ». On the contrary, a possible reduction in the cost of money, which today seems unlikely in a very short time, would lead to a decrease in the expected return.
3% cushion for maturity within 12 months
Short-term government bonds are another classic vehicle for monetary reward. Thanks to the European Central Bank’s monetary tightening, today’s BTPs with a remaining maturity of between three and 12 months are yielding just under 3%. You can also consider Cct, a floating rate treasury bond, which allows you to follow price dynamics, because it is indexed to Euribor (interbank lending rate) at 6 months. “Today it is very difficult to say what is the best option between Btp and Cct. If you want to have inflation protection, if anything, it is worth looking at Btp Italia, which is associated with price dynamics,” says Rocco Probo, analyst at Consultique. Consumer. “In general, the break-even rate, which measures the difference between the nominal price of a BTP bank and the price of an inflation-linked security, is 1.85% over a twelve-month period. This means that with inflation equal to 2% or higher, BTP Italia will provide more return Attractive, with the same maturity.”
There are those who are also eyeing US Treasury bonds, which today offer higher rates, around 4.3% in maturities between March and April 2024. It is a result of monetary tightening that started first in the United States, and is more and more intense, at least for the time being. Here, however, exchange rate fluctuations must also be taken into account: a possible depreciation of the green currency against the single currency would, in fact, have a negative impact on the return on investment in the US currency. “The situation today remains highly uncertain: it is always difficult to predict currency movements – says Probo – but today it is particularly complex, because it is not yet clear what the impact of the banking crisis will be on both sides of the Atlantic and therefore, the course of monetary policy remains uncertain.
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