Fixed income part of the portfolio and savings acc interest rate

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Spgold
Posts: 85
Joined: Fri May 10, 2019 4:52 am

Fixed income part of the portfolio and savings acc interest rate

Post by Spgold »

Hello,

For the fixed income part of the portfolio there is always the possibility to currently keep part of it in a savings or term deposit acc.

What is currently considered to be a “high” interest savings acc or term deposit in the European and UK region ?

Thanks
Laurizas
Posts: 515
Joined: Mon Dec 31, 2018 3:44 am
Location: Lithuania

Re: Fixed income part of the portfolio and savings acc interest rate

Post by Laurizas »

Lithuania - 2%
Valuethinker
Posts: 48944
Joined: Fri May 11, 2007 11:07 am

Re: Fixed income part of the portfolio and savings acc interest rate

Post by Valuethinker »

Laurizas wrote: Fri Jul 16, 2021 3:04 am Lithuania - 2%
So the backstop is the Lithuanian government?

That's a very small GDP country to bail out a major financial institution?

For deposits of less than the Eurozone insurance limit of 100k EUR, that's probably OK. Caution would however suggest to me not putting more than say 25% of my portfolio of fixed income into any one Lithuanian financial institution, and not more than 50% into Lithuanian ones (with the others in larger Eurozone countries)-- or even 40%. Better safe than sorry.
Valuethinker
Posts: 48944
Joined: Fri May 11, 2007 11:07 am

Re: Fixed income part of the portfolio and savings acc interest rate

Post by Valuethinker »

Spgold wrote: Fri Jul 16, 2021 12:51 am Hello,

For the fixed income part of the portfolio there is always the possibility to currently keep part of it in a savings or term deposit acc.

What is currently considered to be a “high” interest savings acc or term deposit in the European and UK region ?

Thanks
In the Eurozone, if you get 1% you are probably doing pretty well. Make sure you stay within the 100k EUR guarantee limit per financial institution (and that the account is so covered).

UK is probably pretty similar. Insurance limit is £85k. If you are with RBS/ Natwest then the government is, in fact, the main equity holder.

Don't get too greedy on this. In 2007/8, banks were paying 5%, and the Icelandic banks were paying 8%. 6 months later, we knew why - a number of local councils took a hammering, losing millions of pounds (I am not sure whether they were eventually compensated). Regulators have made it abundantly clear that, going forward, depositors who were exploiting higher interest rates also accepted higher risk, and will be "bailed in" in any bank bailouts ie converted to equity at a huge dilution. Bank of Cyprus depositors over 100k EUR had precisely that happen to them.

Taylor Larrimore is always quoting some long time investor that more money was lost chasing yield by investors, than almost any other way ...
Laurizas
Posts: 515
Joined: Mon Dec 31, 2018 3:44 am
Location: Lithuania

Re: Fixed income part of the portfolio and savings acc interest rate

Post by Laurizas »

Valuethinker wrote: Fri Jul 16, 2021 11:13 am
Laurizas wrote: Fri Jul 16, 2021 3:04 am Lithuania - 2%
So the backstop is the Lithuanian government?

That's a very small GDP country to bail out a major financial institution?
Yes and yes. Nevertheless major banks give 0, aha, zero. It is only small local credit unions that give 2 % (there is insurance by the state up to 100k).
xxd091
Posts: 492
Joined: Sun Aug 21, 2011 4:41 am
Location: UK

Re: Fixed income part of the portfolio and savings acc interest rate

Post by xxd091 »

The “fixed income “ part of the portfolio is the portion of your investments that reduces the volatility of the portfolio while the equities do the growth /heavy lifting
Traditionally bonds did this job and still do in spite of a constant search for alternatives
They also have the possibility of growth and have historically outperformed shares occasionally
Cash is for day to day living and must be easily accessible-therefore it is difficult to get growth/reasonable interest rates
xxd09
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tre3sori
Posts: 460
Joined: Wed Jul 24, 2019 3:13 am

Re: Fixed income part of the portfolio and savings acc interest rate

Post by tre3sori »

Spgold wrote: Fri Jul 16, 2021 12:51 am
What is currently considered to be a “high” interest savings acc or term deposit in the European and UK region ?
Germany:
1yr term deposit with German deposit insurance: 0.25%
3yr term deposit with German deposit insurance: 0.50%
5yr term deposit with German deposit insurance: 0.65%
7yr term deposit with German deposit insurance: 0.70%

Source (in German): https://www.test.de/Festgeld-4196084-0/

For comparison: Yield to Maturity of Vanguard Global Aggregate Bond UCITS ETF EUR Hedged 1.0 %, duration 7.6 yrs.
The information provided is intended to be entertaining. It is not to be construed as professional advice. Use it at your own risk.
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