Bonds or saving account (1.9% p.a.)?

[joannsmith]

Hi,

I'm planning an investment to 60% stocks (VWCE) and 40% bonds. The bonds part is there to reduce risks/volatility.

In my country I have an option to have a saving account with 1.9% p.a. interest rate - after taxes. This may ofc change, but expect that this rate will stay at least for a year or so.

I was considering an EUR-hedged bonds ETF for that 40% for my portfolio. I don't know that much about bonds, but their yield are low and I don't see any signs this should change soon. They hardly reach that 1.9% p.a.

Do you think it's better to invest in bonds ETF or keep the money in saving account? Is there perhaps some advantage of bonds ETF that I'm overlooking?

Thanks!

 

[resjudicata]

@joannsmith A 1.9% savings account is a mega deal, where are you getting this and what conditions apply?

 

[nishan]

@resjudicata It may not be, depending on the currency. 1.9% on EUR would be an amazing deal, but on a much smaller currency it might not be

 

[joannsmith]

@nishan Indeed, it's not a EUR saving account, but a CZK saving account (that's my primary currency anyway).

 

[nishan]

@joannsmith I'm in CZ! Moneta do 2.5% on a savings account by the way

CZK is a very strong currency to be in at the moment thanks to the central bank. Not only do you get the interest, but there is an excellent chance of appreciation vs the EUR and USD. I'd say keep your Koruna and get a Moneta account.

 

[jsis]

@resjudicata The ECB should set up some sort of structure to allow easier opening of saving accounts. Currently you can get up to 3% for 84 months in Lithuania and 2.5% for 12 months. Thats a killer deal in most of the EU and it comes with the standard 100k€ state insurance, foreign capital should flock to local credit institutions, but it can't with out jumping through hoops

 

[resjudicata]

@jsis 2.5% for a year is great!

They must be paying out of their own pockets for that or doing something risky with it. Many people still remember the too good to be true IceSave ordeal.

 

[jsis]

@resjudicata Its a credit union offering and we do have the highest inflation in EU if not mistaken.

 

[evietheturtle]

@resjudicata It completely depends on the currency...