The Smart Alternative to Savings Accounts

Need a compelling reason to invest your money somewhere other than your bank account? You don’t need to look further than your bank account itself.

Take a look at the interest rate assigned to your account. If your savings are sitting in any major German bank, this number will be hovering somewhere around 0.01 percent.

That means your balance will increase by just EUR 1 per year on a EUR 10,000 balance. In 5 years, your wealth will have grown to the great heights of EUR 10,005.

Unfortunately for your savings goals, that’s the best-case scenario. There are also bank fees to consider.

Added to that, inflation is now on an upward swing in Germany, meaning the price of goods and services is slowly increasing (for instance, in 2001 a BigMac cost EUR 4.80. Now it costs EUR 5.29 ). Let’s assume inflation holds steady at today’s rate of 7 percent per year. What effect would this have on the real value of your money?

In five years time, you would need EUR 12,100 to buy what you could have bought with EUR 10,000 today. Meanwhile, your bank account will have only grown to EUR 10,005 – making you poorer than you were when you deposited your savings.


So, what’s the alternative to a bank savings account?

Looking at it from a long-term perspective, the stock market has historically yielded around 6 percent annual return – or around 4.6 percent when you subtract the effects of inflation.

Of course, historical return are not an indicator of future returns. And a higher expected return always carries a higher risk. With any investment, it is important to be aware of the risks. You can also lose your money. 

Let’s take a look at this chart:

As you can clearly see, both the US and European stock markets went through a deep trough during the financial crisis. It took a good two years – from 2007 to 2009 – for the markets to start recovering from this blow. Investors with a short-term investment horizon, who took their money out of the market during this period, lost a lot of money.

On the other hand, investors who were able to ride out the storm for a few years, would now be making strong gains again.

This shows how important it is, especially when investing in the stock market, to have an investment horizon of several years as well as the proverbial ‘staying power’. Because nothing is worse than panicking and selling your shares when prices are at their lowest.


What’s the lower-risk investment option?

For those who want an investment that’s less prone to market fluctuations, there are other options. One of them is ‘fixed-income securities’, which includes things like bonds.

Countries and large organisations use bonds as a way of borrowing money. Generally speaking, both are pretty good at paying the money back on time, along with a pre-determined interest rate. These types of investments provide lower returns than the stock market, but are also considered safer because they are less volatile.

Take, for example, a 3 percent fixed-rate bond that’s based on a 5-year term. A EUR 10,000 investment in these bonds will result in an annual EUR 300 payment until maturity, when the investor will also receive the original EUR 10,000 back… a tidy EUR 1,500 gain by the end of the investment period.


Can I combine bonds and stocks into one investment?

With Inyova, your customised portfolio strategy can be based purely on stocks, or it can include a mix of stocks and government bonds. We adjust the ratio of stocks and bonds to create a portfolio that works for your financial situation and your personal preferences. Regardless, we will mitigate your risk by diversifying your investment across companies in different industries, company sizes, countries, and more (find out how we do that here).


Sounds great, how do I get started?

The first step is to get your personalised impact investing strategy – it’s free and non-binding. Using our easy online tool, you pick investment themes based on your personal values and interests. We show you exactly what stocks we recommend you invest in.

From there, our team will create a personalised investment strategy for you to consider. This is completely free & non-binding.

Tillmann Lang

Tillmann Lang

CEO and Founder

For many years, Tillmann has been working on the question of how to make the world more sustainable – and the role finance has in this transition. Before founding Inyova, Tillmann worked for more than 6 years at the strategy consultancy McKinsey & Company.

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