The difficult task of investing in the face of rising costs

Poupança: A difícil tarefa de investir face ao aumento de custos

In the aftermath of World Savings Day, which was celebrated this Monday, our researcher conducted research into the various products in which he could invest his money. A task that is not always easy. According to Intrum’s study, 33% of Portuguese admit that in the event of an unforeseen problem, they could pay an amount equal to less than a month’s salary from their savings without incurring debt. Yet it represents a percentage above the European average, which is 26%. It is true that there are always small steps you can take in your daily life that can make all the difference at the end of the month. Your wallet will thank you and your savings can grow fat with it.

Term Deposits – If simplicity is one of the advantages, the yield on offer makes this financial product less attractive, despite the rise in interest rates by the European Central Bank (ECB). A decision that disadvantages those who have credit, but benefits those who have savings. According to the latest data from the Bank of Portugal (BdP), the amount of new term deposits increased by 7% in August compared to the previous month, to EUR 4,124 million. This is the highest value since January 2020, when it reached EUR 4,195 million.

The truth is that this product has lost fans in recent years due to a low fee. According to Deco, “term deposits of up to 12 months, which can be mobilized in advance, are generally the best option for this first phase of savings. While current yields are not particularly attractive, capital is guaranteed and liquidity is immediately available.

And if there is no financial investment that is 100% risk-free, there are also applications that carry greater risk than others. If we analyze the risk scale of the different financial products available to savers and investors, deposits are among the safest applications and in the worst case and if the bank goes bankrupt, customers can rely on the Deposit Guarantee Fund for up to 100,000 euros per bank and per holder.

Savings certificates and CTPC – The loss of attractiveness of term deposits is causing Portuguese savers to increasingly look for government savings products. In this universe, the Treasury Savings Growth Certificates (CTPC) – which replaced the Savings More Treasury Certificates – are the product that has generated the most interest. In the case of savings, the return is calculated on the basis of the average of the three-month Euribor values ​​observed over the past ten working days, plus 1%. The interest rate for new subscriptions to savings certificates (series E) was set at 2.106%. In the CTPC, the interest rate rises: 0.75% (gross fee) is paid in the first and second year, and rises to 1.05% in the third year, 1.35% in the fourth, 1.65% in the fifth and 1.95% in the sixth, up to 2.25% in the past year. The interest rate from the second year is increased by a premium corresponding to 40% of the average real GDP growth, at market prices in the last four quarters known in the month preceding the interest payment date.

Teasure Obligations – Until recently, buying government bonds (OT) was a good deal, as it was one of the most profitable ways to implement medium- or long-term savings with guaranteed capital. But when the OT was revived in 2016 when the state launched Variable Income Treasury Bonds (OTRV), the product began to lose its appeal and with it the disinvestment tendency that Portuguese families had detected in debt securities.

In terms of risk, it is similar to that of certificates, that is, there is a risk of capital loss only if the state defaults.

Retirement Savings Plan – The main advantage of PPRs was the tax advantage they offered, as they made it possible to deduct 20% of annual deliveries of up to 300, 350 or 400 euros, depending on the age of the subscriber. But since 2015, the rules have changed: the limits are based on age (400 euros up to 35 years, 350 euros between 35 and 50 years or 300 euros for people over 50), combined with the limits of the total deductions from collection. Most PPIs are capital guaranteed, so the risk profile is moderate. For Deco, those who are less than ten years away from retirement do not have to invest more money in PPR to be able to pay them off without any problems at age 60. Those between the ages of 40 and 55 can continue to invest as some PPRs have a higher interest rate than deposits.

The State also presents its own product, the State PPR. Depending on the age, it is possible to withhold 2%, 4% or 6% of the salary every month. This means that you only reach the maximum benefit limit if you have a monthly income of more than 3645 euros (with a 4% discount) or more than 7292 euros (with a 2% discount).

handbag – Direct investment in the stock market still deters many Portuguese. It can be a profitable venture, but the risk is always higher compared to other investment products. The investor can make the purchase individually, by direct choice of the shares he wants, or through equity funds, when acquiring units of one of these instruments. Experts advise interested parties to make this investment in time (at least five years) in order to absorb market fluctuations.

What is the best solution to spend your money? It is best to invest periodically and regularly. The tendency of financial markets is to value in the long term. Periodic and regular investing also allows you to purge the effects of emotion on investments. It is not worth guessing the best time to invest.
However, remember that in times of greater uncertainty we should avoid investing in a particular asset. The focus should be on a diversified strategy, betting on different assets and ultimately on different asset classes.

Don’t forget the “divide and conquer” rule: by choosing bonds from different countries and sectors, you can reduce investment volatility.

Consider the financial intermediary: the right option can save a lot of euros, because the choice of the best financial intermediary depends on your investor profile.

Gold – Gold is still seen as a good safe-haven investment in the event of a severe global crisis and financial system collapse. However, this advantage only applies physically to the metal, because when it comes to investing in financial products related to gold (eg funds, ETFs), it must be taken into account that the price of this commodity is extremely difficult to predict.

There are other drawbacks associated with the potential for valuation and speculation in the market. And, contrary to what you may think, when you decide to sell the bars, nothing guarantees you will make money. If we look at the commissions and margins that banks charge, the loss will be even greater. It is very likely that even in a period of rising international gold prices you will not get a better price for the bars given the difference between the sale and purchase value.

But regardless of the chosen way of investing in the precious metal – from holding it, buying coins and bars or investing in financial products with exposure to gold – the investor must always consider the time horizon, which must be considered. in a long-term perspective and potential investment losses, as gold has lost its luster lately.

emergency fund – The first step is to eliminate overspending. There is no magic formula for having balanced accounts and being able to save. Either earn more or spend less. Since it is not always easy to increase income in personal finance, it is necessary to control costs. Once you’ve mapped out income and expenses, you should try to identify unnecessary expenses that can be reduced or eliminated without impacting your well-being. See how much they weigh in your budget. There may be the answer to the fact of not or little saving.

The ideal is to write down all the debts (how much amount to be paid, term, term and interest) and define the debts you want to eliminate. It should start with the debts with the highest interest. If she sees no opportunity to eliminate or reduce debt in the short term, her debt-to-debt capacity is low. Take advantage of the extra income to reduce your debt burden. But in order to assess your financial condition, it is essential that you know whether you are prepared for unforeseen events. Be it unemployment, low or other emergency, there are unforeseen events that can indicate a total lack of control over the budget. Ask the question: If you stopped working today, for example because you were unemployed, how many months could you survive on the same level of spending? The ideal is to have an emergency fund (in cash) that will allow you to live for at least six months with the same level of spending – that is, if you have 500 euros in monthly expenses, you should have an emergency fund of 3 thousand euros .

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