It is not the deposits that bring high profitability, but the investment in markets and insurance products
Since the profitability from deposits is already at normal market levels, it is time we started thinking how to invest our savings so that they increase in the future. A globally acknowledged practice in this respect is "Do not put all your eggs in one basket” or in other words - distribute your savings equally betweendeposits, investment in mutual and pension funds and in insurance products.
"In the recent months there have been all conditions for the awakening of the interest towards investing in financial instruments such as shares, bonds or participation in mutual funds investing on the stock market“, reckonsYavor Achev, representative for Bulgaria of Pioneer Investments, a UniCredit company for the management of mutual funds and alternative investment schemes.
"The data from BNB indicate a growth in the deposits of individuals and the life insurance; in the mutual and pension funds there is a considerable growth, too. I think that the main driving force of this process is the growth of economic activity and the increase of the population's well-being related to this" commented Achev. The data fromUniCredit Bulbank indicate that the growth in life insurance is over 12% since the beginning of the year, and in the mutual funds managed by Pioneer Investments there are over 10% new investments by individuals. There is a growth also in the assets of the pension funds by nearly 12% on an annual basis.
"All these financial products – deposits, life insurance and investments in mutual and pension funds, are very different and are not alternatives to each other" , firmly states Yavor Achev. According to him it is a good idea for anyone with even minimal savings to considera combination of these products, in order to receive protection for their money (with the deposit), profitability (with the investment in funds) and security in case of unexpected risks (with the insurance products). Most of the companies for assets management offer a similar package to their clients so a good individual plan could be prepared for anyone. If we have a small amount of savings and we want it at our disposal in the short term, then the best option is still the deposit with the guarantee it gives to the capital. The investment in funds provides an opportunity for higher profitability in time and the life insurance offers a very good combination of an insurance and investment element, thinks the representative for Bulgaria of Pioneer Investments.
Yavor Achev emphasized that despite being small in scale when compared to the European one, the Bulgarian financial market offers very good products. "Established European and global names in the sphere of asset management and insurance are represented with their products on our market and their offers are not different in terms of fees and commissions, profitability and investors' rights when compared to the developed markets. So we, as a society, only need to learn how to use financial instruments", commented Achev.
According to him we have to choose a financial instrument to match our personality and the type of investor that we are. If we are more conservative, we should consider investments in government bonds or funds that invest in similar low-risk instruments. If we are looking for higher profitability which is related to a higher risk, we should invest in shares and in more aggressive funds, advised Achev. There are obligatory characteristics describing every fund and they can show us its risk profile and if we are ready to take this risk.
"One should consider investment even if they have only a little savings", recommended Yavor Achev. Different empirical studies indicate that the main step has got the greatest importance for the final result from the investment - i.e.the sooner we start investing, the better result we will have . For those who can spare small amounts of money and are just beginning to save the most suitable arethe savings plansin mutual funds or in life insurance. In these situations every month a small amount is transfered into a particular fund (in the funds ofPioneer Investments the minimal monthly installment is USD 20 or EUR 20 ). The analyses show that usually the investors with savings plans receive better profitability from their investment than those whose investments are with a shorter horizon. This is so because they buy shares and bonds even when the market is falling and then during a recovery they earn more.
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