Deposit accounts, especially in this period of low interest rates, are liquidity parking tools that offer a guaranteed return in exchange for giving up the ability to withdraw your capital (in most cases). In general, increasing returns as the duration of the time constraint increases. So you need to know how to start a credit card processing iso.
Things to watch out for:
Credit risk is the risk that the bank will not be able to guarantee interest. For deposits up to $ 100,000, the interbank fund that protects the deposits intervenes, but for larger sums the risk remains. Furthermore, it is always good to remember that the yield is the premium for the risk that the investor assumes by purchasing a certain product, therefore a rate much higher than the market average, must activate an alarm bell on the state of health of the bank, while these instruments typically offer rates of return in line with or below the general state of market interest rates. The initially agreed rate of return may be subject to unilateral changes by the bank, especially in the event of a decline in market interest rates.
Monetary Funds
They are mutual investment funds defined as “monetary” because they consist of bond products with a very short duration, liquidity or other readily payable instruments. This characteristic makes them very stable instruments even in periods in which there is a marked volatility in the markets, but can they therefore be defined as “safe”?
Surely they can be validly considered as alternatives to liquidity parking in order to remove fears of possible risks in the event that the institution that issues them has financial problems. In this case, in fact, it is only covered for investments of less than $ 100,000.
However, it must not be forgotten that these are always market investments and therefore never completely risk-free or capital protected, especially in contexts of markets with very low or negative rates such as the current one (however, these are low volatility investments). The choice to invest in monetary instruments can prove to be not very convenient as the performance in most cases is negative, especially once commissions and taxes have been applied. Monetary funds are an investment method to be used from a portfolio management perspective to limit general volatility by offsetting higher risk instruments, rather than for speculative purposes per se.
Repurchase agreements
It is a contract for the temporary sale of securities. The 2 parties exchange securities today at the current market price and undertake to execute the opposite transaction at a future date at a set price.
Risk of insolvency
There is a risk that the issuer of the underlying security will fail, and in this case, the party who disposed of the securities may refuse to repurchase them;
However, there is also a counterparty risk, ie the bankruptcy of one’s contractual counterparty (generally a credit institution).
Government bonds and bonds
Investment instruments with which debt securities of the issuing company are purchased, effectively becoming creditors. These products can be zero coupon bonds and therefore without any coupons, or they can detach fixed or variable rate coupons.
Among those perceived as safer by investors there are undoubtedly the government bonds therefore issued by states, especially if they are developed areas, and corporate banking ones. But is it really a way to invest your savings safely? Let’s see what all the risks are to consider when buying bonds:
