Friday, December 2, 2022

Why saving is still not worth it

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This is a paid post powered by volt by Vontobel

Even if there is still no sign of rising interest rates in Swiss accounts: the turnaround in interest rates is coming, as can already be seen from the rising mortgage and capital market interest rates. In addition, there are almost daily reports about the upcoming development around the world to read. In mid-May, for example, ECB President Christine Lagarde gave more than just a hint that the key interest rate in the euro area could rise again in the summer – for the first time in six years. At the beginning of May, the US Federal Reserve raised its key interest rate by a whopping 0.5 percentage points.

The background to the development is well-known economic theory: rising interest rates lower inflation. The effects of higher key interest rates are also well known: in the medium to long term, better conditions for savers can be expected. But will these fight inflation?

Back to the (savings) future?

Stock market values ​​have stagnated in recent weeks. Many investors have only started investing in recent years because their savings accounts have increasingly degenerated into zero calculations. Today you ask yourself the question: Should I stay invested? Or is the time ripe to become a saver again?

But how much interest can you expect? That’s still up in the air. Most experts are assuming that interest rates on savings will rise only moderately, especially since they are currently often starting the turnaround in interest rates from zero. Or from an even lower level, after all the key interest rate is still negative at -0.75 percent. So it will be a while before interest rates can even compensate for inflation. The parked money waiting for higher interest rates will most likely lose value.

As an example: At the end of April, the Swiss National Bank announced that it was assuming inflation of 2.1 percent in this country for the current year. Which is still an astonishingly low rate in an international comparison, but nevertheless: a savings interest rate of 0.5 percent cannot compensate for the loss of purchasing power due to inflation.

A possible picture of the future can be seen by looking at the past: According to the comparison service moneyland.ch, between 2008 and the end of 2020 an investment in a savings account would have yielded an average annual real interest rate of just 0.26 percent. In the meantime, 10,000 francs would have become 10,339 francs. If the same amount had been invested in the securities of the Swiss Market Index on the Zurich Stock Exchange, it would have almost doubled to CHF 19,000. Even if the real interest rate had been a little higher: the stock market is an advantage!

volt by Vontobel brings 300 experts into one app

volt by Vontobel is the Swiss investment app with 300 experts, personal advice and over 90 years of investment expertise.

You have the choice: Either a portfolio designed by you according to your own needs and beliefs – or put together for you by Vontobel experts and ready-to-invest.

You benefit from a team by around 300 experts who professionally manage your assets

Personal advice by Vontobel advisors, who are also available digitally to customers with questions about their investment topics.

More than 15 freely selectable investment themes and alternative investments such as gold, real estate, hedge funds, and commodities.

All this from a Swiss investment app and a company with over ninety years of investment expertise. Personally, also digitally. Easy opening via app; without a customer appointment and time-consuming paperwork.

volt by Vontobel is the Swiss investment app with 300 experts, personal advice and over 90 years of investment expertise.

You have the choice: Either a portfolio designed by you according to your own needs and beliefs – or put together for you by Vontobel experts and ready-to-invest.

You benefit from a team by around 300 experts who professionally manage your assets

Personal advice by Vontobel advisors, who are also available digitally to customers with questions about their investment topics.

More than 15 freely selectable investment themes and alternative investments such as gold, real estate, hedge funds, and commodities.

All this from a Swiss investment app and a company with over ninety years of investment expertise. Personally, also digitally. Easy opening via app; without a customer appointment and time-consuming paperwork.

Potential winners and losers

When investing, too, interest rates make for a more complex situation, which is why advice from experienced investment experts can make sense. Fixed income investments lose value. Observations in recent years also show that bank or energy stocks and commodities can benefit from the new situation. As we are currently experiencing, however, it is becoming more difficult for risky stocks and for areas such as tech and retail – sectors that recently benefited from low interest rates and the pandemic.

So there are new rules of the game. Such as many investors are not yet familiar with. It is all the more important to observe a few basic rules: a long investment horizon, a diversified portfolio and a suitable investment strategy. And it makes even more sense to consult experts who are prepared for the complexities of this new market. An example of how this can work in times of digitalization is the volt by Vontobel app. It offers a hybrid system of independence and established financial expertise. You can easily manage and design your own portfolio. At the same time, there is the option of managing a portfolio put together entirely by Vontobel experts. Or to rely on the advice of Vontobel investment advisors at certain moments. Quite simply via app and digitally.

How long and how much will interest rates rise? And how will the stock exchanges react? Nobody really knows. It is all the more important to be prepared. Based on all the experiences of economic history, one thing is clear: With the right understanding of the market, investments will also be worthwhile in the coming months and years.

Presented by a partner

This post was created by the Ringier Brand Studio on behalf of a client. The content is journalistically prepared and meets Ringier’s quality requirements.

Contact: Email Brand Studio

This post was created by the Ringier Brand Studio on behalf of a client. The content is journalistically prepared and meets Ringier’s quality requirements.

Contact: Email Brand Studio

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