An alternative to a savings account

“Our daughter is still in primary school. But we want to lay a good foundation for the future today. What if she wants to go to university, or needs capital for her first flat? We want to make sure she has financial resources for this. Can we do this by regularly setting aside small amounts?”, asked a young mother. Especially when interest rates are low or at zero, traditional long-term investment vehicles such as savings accounts and building association savings agreements lose any realistic chances of preserving the invested capital. Notable returns are practically impossible. “Our Raiffeisen bank advisor told us about fund-based saving,” the young mother said.

Fund-based saving: the modern way to invest capital

“You might be investing for your retirement, or to make a special dream a reality. Everyone has their individual wishes, needs, and goals when investing,” explained our bank advisor. “Fund-based saving can be a good solution for steadily building wealth over the years with small monthly contributions. But higher risks must also be taken into account in this.” With fund-based saving, you invest regularly in a selected investment fund (What are funds?). You can participate in opportunities on the capital market starting at EUR 3 per month. Fund-based saving combines the concept of gradual asset accumulation with the earnings opportunities of different asset classes and securities, such as shares or bonds. But capital loss is also possible.

Fund-based saving offers high flexibility

High flexibility and good risk diversification make fund-based saving an attractive alternative to traditional savings accounts. “You are not bound by a set term. But we do recommend a minimum holding period depending on the fund,” the advisor noted. “You can increase, reduce, interrupt, or stop your contributions at any time, or sell fund units that you have purchased. Please keep in mind that capital losses may be incurred in negative market phases.” And should you want to invest a larger sum at some point, this is also no problem. You can purchase fund units at the current issue price.

Broad risk diversification

“It is called fund-based saving, but you cannot expect a set interest rate as is the case for a savings account. Funds are also not protected by deposit insurance,” the Raiffeisen advisor explained. “Investment funds are subject to market trends and to price volatility that depends on the securities held by the fund. This means that if things go poorly, capital may be lost.” But because funds invest in many different securities, the risk is distributed. And you can also profit from the so-called cost average effect. “This means that when you make regular investments of the same amount in funds, you acquire more or fewer units for one contribution depending on the current price of the fund. Because the contributions remain the same, you acquire more fund units when prices are low, and fewer units when prices are higher. Because more fund units are acquired when prices are low, this results in a more attractive average purchase price over the long term – though capital losses cannot be ruled out,” explained the Raiffeisen advisor. This principle is especially beneficial when prices fluctuate widely.

What fund might be right for me?

There is a wide range of investment funds to choose from. “We place a high focus on security when investing. And it is important to us to invest in sustainable companies. Our advisor at Raiffeisenbank a.s. helped us a great deal in choosing the right investment fund,” the young mother related.