Bulgarian Savings Surge Amidst Inflationary Concerns, Experts Urge Investment Action
Bulgarians are accumulating notable savings, with bank deposits soaring by BGN 30 billion in the past five years, now representing over 40% of the nationS GDP. This trend, while offering a sense of security, is largely attributed too a distrust in capital markets and a cautious “just in case” mentality. However,experts warn that annual inflation rates of 6-10% are steadily eroding the purchasing power of these savings,effectively halving their value in less than a decade. The “rule of 72” illustrates this financial evaporation, suggesting that dividing 72 by the inflation rate reveals the number of years it takes for an investment’s real value to diminish significantly.
While tangible assets like gold and Lego can offer profit and prestige, they are deemed illiquid and suitable only for experienced investors. Cash,though providing peace of mind during uncertain times such as war or recession,should ideally constitute no more than 10-20% of an investment portfolio.
The stark contrast between investing and holding cash is highlighted by a hypothetical scenario: BGN 10,000 invested in an ETF yielding an average of 7% annually could grow to approximately BGN 38,700 after 20 years. In contrast, the same BGN 10,000 held in a deposit with a 1% interest rate, after accounting for 5% inflation, would retain a real value of less than BGN 6,000. This disparity underscores that the choice is not merely about management style, but between financial growth and stagnation.
The fear of market volatility is understandable, but the greater danger lies in inaction and the corrosive effect of inflation.The true risk, according to financial analysts, is frequently enough found not in market fluctuations, but in the lack of growth. Ultimately, the most valuable asset for navigating financial markets is robust financial literacy.
*This material is analytical and does not constitute a proposal to buy or sell financial assets.
