The difficult task of investing in the face of rising costs

In the wake of World Savings Day, which was celebrated on Monday, oi searched for different products in which he could invest his money. The task is not always easy. According to the Intrum study, 33% of Portuguese people admit that in the face of an unexpected problem, they can pay an amount equal to less than one month’s salary from their savings without going into debt. However, it is a higher percentage than 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 a difference at the end of the month. Your wallet will thank you so your savings can increase.

Term Deposits – If its simplicity is an advantage, the rate of return offered makes this financial product less attractive, despite the higher interest rates by the European Central Bank (ECB). A decision that punishes those with credit, but benefits those with savings. According to the latest data from the Bank of Portugal (BdP), the volume of new time deposits increased by 7% in August compared to the previous month, reaching 4,124 million euros. This is the highest value recorded since January 2020, when it reached 4,195 million euros.

The fact is that in recent years, this product has lost fans due to low pay. According to Deco, “Term deposits of up to 12 months, which can be prefilled, are usually the best option for this first stage of savings. Although current returns are not particularly attractive, the capital is guaranteed and liquidity is immediate.

And if no financial investment is 100% risk-free, it is also true that there are applications that carry more risks than others. If we analyze the amount of risks of various financial products available to savers and investors, then deposits are among the safest applications, and in the worst case scenario, and in the event of a bank failure, customers can turn to the Deposit Guarantee Fund for up to 100 thousand. Euros per bank and per owner.

Savings Certificates and CTPC – The loss of attractiveness of term deposits has prompted Portuguese savers to increasingly look to government savings products. In this world, Treasury Growth Certificates (CTPCs) – which have replaced more treasury savings certificates – are the product that has sparked the most interest. In the case of savings, the rate of return is calculated based on the three-month average values ​​of Euribor observed in the previous 10 working days, plus 1%. The interest rate for new subscriptions to savings certificates (Series E) has been set at 2.106%. In CTPC, the interest rate increases: in the first and second years, 0.75% (gross pay) is paid, it rises to 1.05% in the third, 1.35% in the fourth, 1.65% in the fifth and 1.95% in the sixth, and amounted to 2.25% in the last year. The interest rate is increased from the second year onwards at a premium equal to 40% of the average real GDP growth, at market rates for the last four known quarters in the month prior to the interest payment date.

Management obligations – Until recently, buying Treasuries (OT) was a good deal, as it was one of the most profitable ways to apply medium or long-term savings with guaranteed capital. But in 2016, if the OT gained a new lease of life when the state launched Treasury Variable Income (OTRV) bonds, the product began to lose its attractiveness, and as a result, the trend toward divestment that Portuguese families had been tracking increased. . in debt securities.

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

retirement savings plan The main advantage of PPRs was the tax benefits they offered, because they allowed a 20% discount on annual deliveries of up to 300, 350 or 400 euros, depending on the age of the subscriber. But since 2015, the rules have changed: limits are based on age (€400 up to 35 years old, €350 between 35 and 50 or €300 for those over 50), as well as limits on total group deductions. Most PPRs are capital secured, so the risk profile is moderate. For Deco, those who don’t stay 10 years out of retirement should invest more money in PPR so they can get it back at 60 without problems. Those between the ages of 40 and 55 can continue to invest, as some PPRs have higher interest rates than deposits.

The state also offers its own product, known as State PPR. 2%, 4% or 6% can be deducted from salary each month depending on age. This means that you will reach your maximum benefits only if you have a monthly income of more than 3,645 € (at a 4% discount) or more than 7,292 € (at a 2% discount).

hand bag – Direct investment in the stock market still scares many Portuguese. It may represent a profitable business, but the risk is always higher compared to other investment products. The investor can make the purchase individually, when choosing the shares he wants directly, or through stock funds, when acquiring participating units in one of these instruments. Experts advise interested parties to make this investment over time (at least five years) to overcome market volatility.

What is the best solution to apply your money? It is better to invest periodically and regularly. The trend of the financial markets is to rise in the long term. Periodic and regular investing also allows you to remove the effects of emotion on investing. It is not worth trying to guess the best time to invest.
However, do not forget that in times of heightened uncertainty, we should avoid investing in a particular asset. The focus should be on a diversified strategy, betting on many assets and, ultimately, on different asset classes.

Do not forget about the rule of “divide and conquer”: by choosing bonds from different countries and sectors, you can reduce investment volatility.

Consider the financial broker: the right choice can mean saving many euros, as choosing the best financial broker depends on your investor profile.

He went – Gold is still seen as a good safe investment in the event of a serious global crisis and the collapse of the financial system. However, this advantage applies only to the metal from a physical point of view, because when it comes to investing in financial products linked to gold (funds, ETFs, among others), it must be taken into account that the price of this raw material is very difficult to predict. .

There are still other drawbacks associated with the possibility of price hikes and market speculation. And contrary to what you might think, when you decide to sell the panels, there is no guarantee that you will make money. If we take into account the commissions and margins charged by the banks, the loss will be even worse. It is very likely that even in a period of high global gold prices, you will not get a better price for the bars, due to the difference between the buy and sell value.

But regardless of the method chosen to invest in the precious metal – from owning it on hand, buying coins and bullion, or investing in financial products with exposure to gold – the investor should always consider the time horizon, which should be seen in a long-term perspective, potential investment losses, Where gold has lost its luster recently.

emergency fund – The first step is to eliminate overspending. There is no magic formula for having balanced accounts and being able to save. You either earn more or spend less. As in personal finance, it is not always easy to increase income, it is necessary to control costs. After determining income and expenses, you should try to identify unnecessary expenses that can be reduced or eliminated without affecting your well-being. See how much it weighs in your budget. There may be an answer to the fact of not saving or saving little.

The ideal option is to write down all the debts (the remaining amount to be paid, installments, term, and interest) and specify the debts you want to cancel. You should start with the higher interest debt. If, in the short term, it does not see any possibility of debt cancellation or reduction, its debt capacity is low. Take advantage of the extra income to reduce your debt burden. But to assess your financial condition, it is necessary to know whether you are ready for unexpected events. Whether it is an unemployment situation, a low emergency or another emergency, there are unforeseen events that can represent a complete lack of budgetary control. Ask the question: If you stop working today, for example, because you were unemployed, how many months will you be able to survive while maintaining the same level of expenses? The ideal is to have an emergency fund (with liquid assets) that allows you to live for at least six months at the same level of expenses – that is, if you have 500 euros of monthly expenses, you should have an emergency fund of 3 thousand euros.