After ECB shock: Good investment alternatives
Thursday, 05.06.14, written by Juliane Wellisch
Today, Mario Draghi of the European Central Bank (ECB) announced the cut in the key rate to 0.15 percent. For savers, secure investments are now finally a loss. Which alternative for your investment do savers even have? Anyone who says goodbye to the passbook, daily and fixed money can save his savings.
Investment alternatives for savers: Here’s still returns
Today’s decision by the ECB to lower the key interest rate was eagerly awaited by economists and consumers alike. Now it is clear: the key interest rate slips to historically low 0.15 percent. There is also the introduction of negative interest rates for banks depositing money at the central bank. These must now accept a penalty interest of minus 0.1 percent for their deposits. These steps have significant implications for savers who still invest their assets classically. Even now, secure investments rarely pay off a return. In order to receive interest above the inflation level for its capital, one has to say goodbye to traditional secure investments such as the savings account, call money or time deposit.
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Alternatives to low-return secure investments
Most consumers know that the savings book has long been hardly suitable for investing their own assets profitably. The ECB rate cut will not change that. For even before the renewed adjustment of the interest rate most passbooks offer less than 0.5 percent interest. Fixed deposits have become less and less lucrative in recent years. For middle-income savers, however, returns are possible. Mutual funds, equities, assets and savings plans can be used to reliably increase your own capital.
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Investment Alternative # 1: Mutual Funds – Good prospects through broad diversification
Mutual funds invest savers’ money in various companies, securities, real assets, or shares. While some funds focus on real estate, fixed income or equities, others are well mixed. This results in very different return options. Savers should never forget the risk aspect of funds that promise high returns. Even if losses can be cushioned by the broad distribution of deposits, a mutual fund can not offer such a high degree of security as, for example, the overnight money.
Investment alternative no. 2: Stocks – High profit opportunity, but also high risk
Stocks can generate significant profits. Savers who choose to invest in equities will not only benefit if the share price rises. Because as an alternative to a secure investment, stocks pay off primarily through the dividend. This is distributed to shareholders if the respective company is doing well. However, if the stock corporation gets into financial difficulties, savers are also at risk of high losses. Instead of investing in a single company, an equity fund is therefore an alternative. Here one has high yield possibilities and does not have to worry about losing all the capital in one fell swoop if a stock company becomes insolvent.
Investment Alternative # 3: Real Estate
Home ownership is still the investment goal number one for many savers. Finally, you save on rent payments and also gains a lot of freedom. In popular regions in recent months, houses and condominiums have also risen considerably in price. Experts are therefore divided on whether real estate as an alternative to the classic investment for savers really worthwhile.
If you want to build your own four walls or purchase, you should therefore make sure that the property or the property is not already overpriced. In any case, low interest rates mean that there are currently very favorable real estate financing options, especially if you already have enough equity capital. Bausparkassen are currently promoting their contracts with the later guaranteed favorable loan interest. However, here also the interest rates for the savings account are very low, which makes some Bauspar contract at the moment as an investment for savers rather unattractive.
Which investment is the best alternative for savers?
In addition to the alternatives for investing, savers have countless other options for increasing their wealth. If you want to put some money aside every month, you benefit, for example, from a good fund savings plan. For savers who want to invest more money, they can split the investment into bonds, funds and equities. It applies to all savers: Before investing should be fully informed about their own ability and advice.