Deposits are probably the favorite product of the most conservative savers to make their money profitable. The problem is that for many they are being very disappointing. The ECB's rate hikes should have boosted its profitability (interest rates currently reach 4.25%); However, the average interest on deposits in Spain does not even reach 2.5%. And in the big banks it is even worse.
Is there any alternative? With the same guarantees, only savings accounts. But there is a product that has been around for months and that promises higher returns with little risk. These are monetary funds. They are low-risk investment funds that invest in high-quality, very short-term fixed income products, such as Treasury bills or deposits.
These products are very conservative and, although their capital is not guaranteed, their objective is to preserve the money of the participants and achieve a profitability similar to that of the interest rates, explain the experts of the financial products comparator HelpMyCash.com. And now rates are at their highest since 2008.
Additionally, these products are highly liquid, so money can be withdrawn at any time. So, if rates fell and profitability expectations were reduced, the money could be withdrawn.
The assets of monetary funds have grown by 50% in the first eight months of the year, according to Inverco.
“It depends on the fund and the commissions charged by the managing entity, although right now, with interest rates above 4%, a net return above 3% can be achieved with very little risk,” they explain in HelpMyCash.
According to experts, to assess the remuneration of a monetary fund, one should not look at past profitability, but rather at the expected profitability (IRR). It is important to highlight the expected term, because funds, unlike deposits, do not have a guaranteed return, but can vary constantly.
Revolut's flexible accounts, for example, which have just been launched in Spain, have a net expected profitability of 3.7%. They can be contracted from one euro and interest is paid daily. Money can be redeemed at any time.
The Revolut Flexible Account is a money fund managed by Fidelity with a risk rating of one out of seven. Invest money mainly in time deposits, promissory notes and certificates of deposit.
Revolut also allows you to invest in your monetary fund in pounds and dollars, in which case the expected return exceeds 5%. But be careful, because investing in a currency other than the one we have in our account increases the risk of the operation, so it may not be suitable for very conservative clients, HelpMyCash clarifies.
The inbestMe savings portfolio, for its part, has a net expected return of 3.25%. It can be hired from a thousand euros. You can also invest in dollars; In that case, the IRR is 4.8%.
The inbestMe portfolio has a risk of one out of seven and is made up of two monetary funds, one from BlackRock and the other from Pictet. Interest settlement is daily and the money can be withdrawn whenever you want.
Any investment product can go wrong and post negative returns. Now, monetary funds invest in high-quality products and try to replicate the interest rates of the ECB, so right now they have a very low risk, since the official rates are very high.
Furthermore, the advantage of these products is that you can predict how they will behave depending on how the regulators act and, if things get worse, you can withdraw the money, since they are a very liquid product. Of course, no matter how little risk they have, monetary funds are not a deposit.