Inflation is overwhelming the Czech Republic. Experts have told you how you can protect your savings

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Astronomical inflation in the Czech Republic draws people more to think about investing and saving. The editors of TN.cz and TV Nova addressed four economists with questions about how to invest, which investments are risky, but also which you need to have knowledge of and which, on the contrary, you have nothing to do wrong.

According to estimates, year-on-year inflation growth in January could reach double digits. Many Czechs are thus afraid of inflation waving their money. “The worst thing a person can do with money is to put it under the pillow at home, because there they are sure that they will lose purchasing power by the full amount of inflation,” said economist Štěpán Křeček.

How to invest

According to Křeček, people should have money in their account to cover it three to six months. Although money in current or savings accounts earns less than inflation, there is a good reason for that. Many investments have different fees.

“People are investing, they will pay a fee for the investment, but the market will just fail or they will need the money and at the most inopportune moment they will have to withdraw it. works, “Křeček advised.

Another rule is not giving all the money to one type of investmentbut divide them into multiple areas. “It includes real estate, stocks, bonds, gold or other precious metals. As well as other alternatives, or what people understand and what they like, such as a veteran, but they can be stamps, coins or art,” he said.

It also depends on age. According to Křeček, when a person is young, he can afford more dynamic investments, ie those with a higher return but also a higher risk. They can earn him a lot in the long run, but he may face short-term declines in investment.

Investment strategy for a 30-year-old economist David Navrátil approached. “I would like to have some financial reserve to cover unexpected expenses. Whether it’s a broken down washing machine, a car or the risk of losing my job. I would invest everything else in the long run. Either in buying a mortgage property. Or by investing in stocks or a stock fund. , “he described.

“I would not try to time the market, because I would still invest in the long run, but I would pay attention to diversification = not to buy only the shares of one company, which I might like, but the investment portfolio should not look like that. If I did not want to spend time watching “I would like to get advice from my banker or investment specialist and I would rather invest in an investment fund. At the same time, I would set up a standing order to invest every month,” added Navrátil.

At an older age, on the other hand, conservative investments are more appropriate. “For example, if a person has shortly before retirement, he can no longer afford to lose that portfolio by ten or fifteen percent. He should switch to conservative types of investments, such as government bonds, but it can be gold, they can to be real estate, “explained Hamster.

Economist Lukáš Kovanda stated an example of a 50-year-old man who has 100 thousand crowns available for investments. “I would put 30,000 in equity funds, 30,000 in real estate funds and 30,000 I would divide by keeping 15 in cash and 15,000 in bonds. Of the remaining 10,000, I would invest half in gold in physical form, ie ingots and coins, and half, for example, into cryptocurrencies, which is a high-risk thing, speculative, but if I put only 5,000 thousand there, I will not suffer any significant damage, “Kovanda said.

Investments by risk

For investments, in general, the lower the risk, the lower the return and vice versa. “The surest form of savings is a savings account, which also offers an interesting appreciation, although still below inflation. into government bonds, “Navrátil explained.

On the contrary, large risks are associated with equity investments. According to Navrátil, there are no unusual declines of 10 percent, there have been 30 such cases since 1980.

But beware: a lot depends on WHEN they start investing = the timing of entering the market. Looking back, I was able to earn up to + 75% on stocks in one year. But also to lose almost half. 🥴This is the best and worst annual change of the S & P500 since 1964. pic.twitter.com/IhjHadeEOO

— David Navratil (@DavidDnavratil) December 16, 2021

“But it is investment in equities or equity funds that can offer long-term returns that not only cover inflation but also value money above inflation: for example, for the S&P 500 stock index, the average annual real (= above inflation) appreciation, including dividend yield, was about 6.5 percent.Of course, you may be unlucky and buy investments just before the long-term correction.History shows that it never happened that after 20 years of investing I could not cover at least inflation, ie delay the purchasing power of my savings.And 80 percent of cases I zero real yield was after five years at the latest, “said Navrátil.

Knowledge and experience

However, investments often require not only financial but also intellectual capital, ie knowledge. This is true, for example, of historical coin collections. Economist Markéta Šichtařová divided the complexity of investments according to her knowledge and insight into the issue.

“At the most challenging end of the spectrum are cryptocurrencies. But I am very reluctant to label them as investments. Only a very small number of cryptocurrencies can currently be considered investments as such, in terms of buy and hold. Numismatics is in second place. People often confuse investment gold and gold collector coins, but collector coins are challenging, and then there are various specific collections such as archival alcohol, veterans, paintings, etc. They can save money very well, but one really has to be familiar with them. , “she said.

According to Šichtařová, such a center is securities. Art wants to buy the right shares, but compared to the technical knowledge of old cars, for example, it is not so difficult.

“A simple investment where you can’t spoil much is investment gold, ie investment coins or ingots. It’s a little trickier with government bonds, it’s important how you approach them. If you want to speculate on rising prices, it’s not “A simple investment, but if he wants to buy and hold, you can’t go wrong. I would still put mortgages and real estate investments in general at the bottom end of the complexity. That’s not much going to go wrong either,” says Šichtařová.

Other areas for investors to look out for are different investment costs and fees. “We can buy shares, for example from CEZ, and these shares can be bought by someone through a stockbroker, with the proviso that there is a management fee, or I can buy it on my own T-shirt and there will be a different approach. One should be careful “How he sets it up. If he wants to have it cheap and do it himself, then he needs to know more about it,” she added.

The most advantageous investment in the Czech Republic

Real estate is one of the most advantageous investments in the Czech Republic. Apart from the period around the financial crisis, their prices only rose in the first decade of this century. However, even these investments have had their pitfalls lately.

Entering the real estate market is extremely difficult due to high real estate and mortgage prices, yet according to Křeček, this type of investment could double in ten or fifteen years.

They also brought out some shares. “For example, who invested in shares on the Prague Stock Exchange last year earned an average of 40 percent, who invested in CEZ shares, so it was 60 percent, who invests in bank shares this year, so it will probably also cover inflation,” Kovanda said. .

Hamster recommends shares of American companies. “If someone starts with stocks, I would recommend buying the entire stock index, so you already have a diversified investment. The S&P 500 will be a good choice in the long run. The S&P 500, for example, fell sharply last March, but returned to its pre-decline position after about five months.

Bonds are a popular investment, and you need to be careful here as well. “There is a big difference between government bonds, which are very certain, and corporate bonds, which are issued by companies. These can be very problematic, especially when those companies get into difficulties. Yields tend to be higher, but also risks,” Křeček said.

According to Křeček, gold is a good investment. “It has great sustainability value, it has never become worthless in the last 4,000 years,” he commented.

TN.cz

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