A profitable alternative to bank deposits. Comon: Amet Member Strategies

Bank deposits are the most popular methods of investing available capital. The main reason for this popularity is the high level of reliability of bank deposits.

Despite all the advantages of this method of investing capital, there are currently alternatives that deserve the close attention of potential investors.

As a real alternative bank deposits You can only consider those methods of investing capital that allow you to receive a higher income, but at the same time have a comparable level of reliability.

Currently, most residents of developed countries can boast of having a deposit with a credit institution. Bank deposits are the most common method of passive investment. Among the advantages of such investment, one should note high reliability, a stable, although not high, level of income, as well as the absence of the need to understand the features financial market.

Despite the huge number of advantages of bank deposits, they have a number of risks:

1. Inflation. If a country experiences a high level of inflation, then a bank deposit can be considered not as a method of generating income, but as a way of preserving existing capital.
2. Bankruptcy of a credit institution. In the event of a bank bankruptcy, depositors can only count on compensation for the amount guaranteed by the state. Over the past few years, the Central Bank has revoked the licenses of a large number of domestic banks. For this reason, the risk of bankruptcy of the selected credit institution is quite high.
3. Risk of fraud. There are many dishonest financial institutions on the domestic market that deceive their clients using hidden fees, etc.

The only method to minimize the risks described above is to choose a reliable financial institution that has a good reputation. At the same time, it should be remembered that deposit rates in the most reliable credit institutions are relatively low. For this reason, you will not be able to avoid the risk of inflation.

Analyzing all of the above, the need for an alternative to bank deposits becomes obvious.

Investments in real estate as an alternative to bank deposits

Currently, it is the best alternative to bank deposits. If you decide to give up bank deposits and decide to invest in real estate, then you can use the following methods:

1. Purchase of ready-made real estate for subsequent sale or rental.
2. Investment of existing capital into housing during the construction phase.
3. Investing capital in shared construction of various real estate properties.

According to available statistics, despite temporary fluctuations in the value of real estate, it becomes more expensive over time. Thus, investments in real estate are practically not inferior in terms of reliability bank deposits, and in terms of potential profitability they significantly exceed them.

Most of investors choose investing in real estate as an alternative to bank deposits due to the fact that this method is not influenced by negative factors, such as:

• Hyperinflation.
• Decrease in value over time.

If you decide to invest your capital in real estate, then you should remember that this investment method is subject to the following economic risks:

1. Declining purchasing power of our country's residents.
2. Decline in business activity.
3. Increasing level of competition in the real estate market.
4. Increased operating costs.

These factors must be taken into account when choosing real estate for investment.

As mentioned above, investing in real estate is an excellent alternative to bank deposits. Among the advantages of investing existing capital in real estate are:

1. Income from real estate is much better protected from inflation.
2. The property will belong to the investor until it is sold. At the same time, the client may partially lose his deposit if the credit institution goes bankrupt.
3. The profitability of real estate investments in the long term is significantly higher than that of bank deposits.
4. Purchased real estate does not lose value over time, but the real value of a bank deposit may decrease due to inflation.

Investing in real estate as an alternative to deposits is only possible if you have the necessary knowledge to select a suitable property.

Bank deposits are the most popular way of investing and saving among Russians Money. This method is simple, understandable and publicly accessible to the population. However, do bank deposits always meet the expectations of depositors? Are there alternative instruments that can reliably and effectively replace deposits? Let's first consider the existing disadvantages and advantages of cash deposits.

Advantages of deposits

The main advantages of bank deposits include the following:

• pre-agreed profitability;
• high liquidity, the ability to close a deposit and withdraw invested funds at any time;
• guarantee of safety of invested funds within the amount established by law (currently this amount is 1.4 million rubles).

These properties of deposits are very convenient for performing such functions as preserving funds, saving for large purchases (which will be made in the future), for carrying out primary accumulation for the purpose of subsequent investment in other financial instruments.

Bank deposits are also used by risk-averse investors to build investment portfolios.

Disadvantages of deposits

The largest and most reliable Russian banks today attract funds from the population for periods of about 2-3 years, and the annual rate is 9-10% in rubles, 3-4% in eurocurrency and 3-5% in dollars. It is easy to see that the profitability of ruble deposits does not even cover the real value in the Russian Federation.

The interest rate on deposits in foreign currency is quite attractive in comparison with large EU and US banks. True, the question of political risks arises here.

It only makes sense to place your money in Western banks if you want to preserve your investment. In large and reliable American and European banks such as Deutsche Bank, HSBC, Citibank, Credit Suisse or Bank of America, you will be offered on average two-year deposits with a very low yield of 0.15–2.0% per annum.

Let us note that using a bank deposit specifically for conservative investment purposes (for example, to save for the purchase of real estate or a child’s education) is generally not very convenient. After all, it is unknown what conditions the bank will offer after the expiration of the current deposit. And what will the profitability be in 2 or 3 years?

Alternative to bank deposits

Let's look at the main alternatives to bank deposits, such as bonds and exchange-traded funds ETFs in terms of holding valuable papers until maturity. In this case, they are instruments with a predetermined final payout amount and can become a real alternative to bank deposits.

1. Bonds

Bonds are securities with a fixed value. This is quite convenient because you initially know how much you will receive when you redeem the bond (assuming you hold it until maturity). This amount is usually called the par price of the bond.

Buying bonds in itself is not a simple procedure. You need to know the exact maturity date of the bonds and pay attention to their credit rating. Often the most attractive bonds may be available only to qualified investors. In this case, they are sold in large lots for amounts of tens or thousands of dollars. For example, Gazprom bonds maturing in 2020 are sold today in lots of $100,000. Therefore, this instrument is inaccessible to a wide range of potential investors.

2. Bond ETFs with maturity

By creating an investment portfolio of bond ETFs with different maturities, you can obtain a very stable and predictable cash flow. If you plan to pay for your child’s education at a prestigious university, you will need to make regular payments for 4–5 years. By using bond ETFs with sequential maturities, you can create a portfolio that will provide uninterrupted funding over a predetermined term.

Let's give an example of such a portfolio. You can create a portfolio that includes bond ETFs maturing in 2017 (with a yield of 6.09%), 2018 (6.57%), 2019 (6.69%), and 2020. (6.59%). In this case, you will be guaranteed a stable financial flow for a period of 5 years.

It is important to emphasize here that we are talking specifically about ETFs with fixed maturities. They differ from other bond funds precisely in the presence of such a term (which ordinary funds do not have).

In the same way, you can create portfolios for savings for the purchase of a house, apartment, etc.

Each investor has the opportunity to personally select the funds, bonds or ETFs that are optimal for themselves and then build a portfolio. For this purpose, you can use a number of specialized sites, for example www.morningstar.co.uk, etfdb.com, finance.yahoo.com, etc.

On October 25, the Bank of Russia lowered the key rate for the fourth time in a row. It decreased by 50 basis points and reached 6.5%. A week earlier, Central Bank Chairman Elvira Nabiullina said in an interview with CNBC: “We see that our rate can not only be reduced, we can act more decisively.” The inflation risks that the Central Bank saw back in September have not materialized, and the forecast for consumer price growth may be revised downward. It is worth noting that the situation with inflation, the containment of which the Central Bank considers its primary task, has changed significantly over the past five years. In March 2015, this figure was 16.9%, and in September 2019 it was already 4.0%. This allows the regulator to reduce the key rate, that is, to make borrowing cheaper for commercial banks, so that they, in turn, lend to companies and citizens for less interest.

“We predict that over the 12-month horizon the Central Bank of the Russian Federation will reduce interest rates cumulatively by 1%, including a reduction of 0.5% until the end of 2019 and another 0.5% in 2020,” notes Natalya Stepanova, director of the investment department of Ingosstrakh-Investments Management Company . The parallel easing of monetary policy in the United States and the eurozone allows the Bank of Russia to make the ruble more accessible without fear of its excessive weakening against the dollar and euro. All this is happening at a time when the transition of the Russian Central Bank from neutral to stimulating policy is critical for economic development. “The slowdown in economic growth in Russia (the GDP growth forecast for 2019 is 1.0%) requires the launch of monetary stimulus, which implies a key interest rate of 6% or lower,” says Natalya Stepanova.

“We predict that over the 12-month horizon, the Central Bank of the Russian Federation will reduce interest rates by a total of 1%, including a reduction of 0.5% until the end of 2019 and another 0.5% in 2020,” notes Natalya Stepanova, director of the investment department of Ingosstrakh Management Company. Investments".

What does this mean for people who traditionally keep their savings in deposits? Bank deposit rates also depend on the key rate of the Central Bank and will inevitably fall. According to the Bank of Russia, over the past five years they have almost halved. If in December 2014 - January 2015 individuals could place their ruble savings at 10-12% per annum, then by the middle of this year the rates on time deposits up to 12 months were 5.3%, and on deposits over 1 year - 6.7%. And, according to Natalya Stepanova, at the end of this year the rate on annual deposits may drop below 5%. At the same time, individuals can no longer roll over deposits at historical rates - this was one of the few options that allows you to fix the current level of return on ruble savings for several years. It turns out that in order to maintain profitability, you will have to look for an alternative to bank deposits.

If you are used to keeping savings and receiving income in rubles, alternativeAn option may be to buy long bonds federal loan (OFZ). These debt securities are issued by the Russian Ministry of Finance, so they have a high level of reliability and coupon income on them is not subject to tax. “For OFZs with an average duration (4-7 years), the average yield to maturity will be 6.59%, and the net coupon income will be 7.05%. In addition, if interest rates of the Central Bank of the Russian Federation are reduced by 1%, the increase in the market value of bonds may be 3-4%, and the estimated level of profitability over the horizon of the next 12 months will be from 9.82% to 11.21%,” notes the director of the investment department of Ingosstrakh Management Company. Investments". This is actually twice the deposit rates at which citizens can now place their ruble savings in banks. And as always with investing, if you're willing to increase your risk, you'll be more likely to earn a higher return. You can create a portfolio of 6-10-year OFZs and fix the yield to maturity at 6.84%, and the net coupon yield at 7.12%. In this case, it is possible to receive 11.24% -13.29% per year.

If you prefer to store funds in foreign currencies, especially euros, and want to maintain profitability, you will have to look even more actively for an alternative. On October 10, on the sidelines of the Finopolis forum, Elvira Nabiullina told reporters that the Bank of Russia would discuss with market participants the possibility of introducing negative rates on deposits in foreign currency, and warned that negative rates in euros for credit institutions are a long-term phenomenon, given the monetary policies of leading countries. The fact is that Russian banks place foreign currency attracted as deposits abroad and are subject to negative rates, that is, they are forced not to make a profit, but rather to pay extra for storing funds. True, the losses are still small and do not pose a threat to the sector, the Central Bank calculated. If banks attract deposits in euros at 0% and invest at minus 0.5%, this will affect profits banking system less than 1%. But it is clear that credit institutions count every penny, they say at the Bank of Russia. There is no talk yet of negative rates for citizens; they could be introduced for companies. However, the largest Russian banks are already refusing to attract deposits individuals In Euro.

Let's see what happens against this background with rates on deposits in foreign currency. According to the Central Bank, since the end of 2014, deposits in euros have decreased from 4.9% - 5.2% to the level of 0.37% -0.65% by the middle of this year. The picture is similar with deposits in US dollars: interest rates on them have fallen by more than half over 5 years. If at the end of 2014 citizens could receive a yield of 5%, then by mid-2019 the level of average deposit rates in the market dropped to 2%. And this trend is long-term. “US dollar deposit rates will continue to decline in the 2020s. The market expects that the American regulator will continue to reduce rates, the scale of which could be 0.5%-1.0% if the scenario of recession in the economy comes true. In this situation, the yield on dollar deposits in Russia will drop below 1% over a 12-month horizon,” says Farid Yunusov, General Director of Ingosstrakh-Investments Management Company. Moreover, banks will reduce interest rates also because the Central Bank is seeking to reduce the use of foreign currency by Russian market and increases the required reserve requirements for dollar deposits.

“US dollar deposit rates will continue to decline in the 2020s. The market expects that the American regulator will continue to reduce rates, the scale of which could be 0.5%-1.0% if the scenario of recession in the economy comes true. In this situation, the yield on dollar deposits in Russia will drop below 1% over a 12-month horizon,” says Farid Yunusov, General Director of Ingosstrakh-Investments Management Company.

An alternative to bank deposits can be Eurobonds denominated in the same currency. Such instruments in dollars are quite widely represented in Russia. “From a tax point of view, the most attractive are sovereign Eurobonds issued by the Russian Ministry of Finance, for which investors are exempt from paying personal income tax on coupon income and currency revaluation,” clarifies Farid Yunusov. For the long-term investor good option may become sovereign bonds maturing in 2028 and 2030. These are issues with a high level of net coupon yield - 7.52% and 6.58% per annum, respectively. The yield to maturity on them is 3.41% and 2.84%. In addition, Eurobonds are traded on the Moscow Exchange and have a small denomination. This makes them liquid - that is, such debt securities can be quickly sold to retail investors. It is worth adding that income from the difference between the purchase and sale prices or redemption of Eurobonds of the Ministry of Finance is subject to personal income tax in the usual manner. But if you own debt securities traded on the Russian stock exchange, more three years, exchange rate differences are not subject to tax.

“Eurobonds in euros also provide returns higher than similar bank deposits. But the list of such instruments is much smaller than dollar instruments. This summer, only 12 issues of Eurobonds in euros with a credit rating and a maturity date in more than 1 year were traded on the market. And only one of them was issued by the Ministry of Finance and exempts resident investors from paying personal income tax on coupon income and currency revaluation,” says the General Director of Ingosstrakh-Investments Management Company. We are talking about sovereign Eurobonds with maturity in December 2025. But the level of yield to maturity on them is only 0.82% and slightly exceeds the deposit rate. In addition, such securities must be purchased for at least 100 thousand euros, which makes them available only to large investors. According to Farid Yunusov, of the corporate bonds in euros that are traded in Russia, it is worth paying attention to the Eurobonds of the Moscow Credit Bank due in February 2024. The yield to maturity on this issue is 3.97%, and the net coupon yield is at 4.92%. However, it is worth remembering that on these debt securities you will have to pay tax on coupon income and income from currency revaluation.

Low deposit rates have forced citizens to look for alternative low-risk investment options for their savings. What options can you find in the stock market?

Traditionally, a bank deposit is the most reliable type of savings. Barely outpacing inflation, it is at least able to maintain the purchasing power of savings, and the risk of the bank’s license being revoked is mitigated by the presence of an insurance system represented by the DIA.

However, in the context of a trend towards a reduction in the key rate, holding money at an, albeit virtually risk-free, but still low interest rate is becoming less and less profitable. It is not surprising that the Central Bank and professional participants in last years stable growth of public interest in the bond market – both government (all kinds of OFZ) and corporate securities.

To move away from deposits, you need a simple and reliable financial instrument, which is suitable for the role offered by the largest domestic banks (Sberbank, VTB24 and others) as well as federal loan bonds placed on the stock exchange.

« Many yesterday's investors opt for OFZ, since it is a clear instrument that currently looks more attractive than deposits both in terms of profitability and risks. Minimal probability of issuer default and the ability to calculate financial results right up to maturity makes OFZ one of the most attractive instruments on the securities market for private investors,” explains investment strategist at BCS Premier Alexander Bakhtin.

For example, for Ministry of Finance OFZ-PD bonds [with constant coupon income - Ed.] with a maturity period in 2021, you can now count on a yield to maturity of 7.9-8.1%. “Longer bonds in the current environment have a high risk, since there is a possibility of sanctions on new government debt issues in November. If there is no worsening of sanctions, OFZ-PD with a repayment period in 2021 could bring about 12-15% already on the horizon of the year,” says Freedom Finance analyst Valery Bezuglov.

Bakhtin proposes to maximize the return on investment by purchasing OFZs for tax deduction(IIS of the first type).

“You can also buy bonds of the largest issuers, the reliability of which is beyond doubt - it is difficult to imagine that the state will allow the financial insolvency of, for example, Gazprom, Rosneft or Sberbank. And in general, if you trust, say, Sberbank or Gazprombank, isn’t it more logical to buy their bonds instead of a deposit and earn a couple of percentage points of additional profitability? If you urgently need funds, the bonds can be sold at any time,” writes Finam Group analyst Alexey Kovalev.

The expert warns that if you need funds from a classic deposit (for those where possible partial withdrawal, and interest rates are lower), it will have to be closed, losing almost all the accumulated interest income. In the case of bonds, you can sell only part of the portfolio and save the accumulated coupon income.

Currency deposits VS Eurobonds

If you look for currency returns, then by foreign currency deposits you can count on a rate in the area 2.5-3% for dollars, and 1-2% for euros, however, due to the announcement of new anti-Russian sanctions, the risk of forced conversion of foreign currency deposits into rubles is growing. This topic was repeatedly raised in the media by the head of VTB, Andrei Kostin. And although the Chairman of the Central Bank, Elvira Nabiullina, has a similar idea, this scenario should not be discounted.

Is there an alternative to foreign currency deposits, but in the stock market? “The situation with foreign exchange instruments is approximately the same - the yield on bonds is approximately two percentage points higher than the yield on deposits. For example, in August, Russian government bonds denominated in dollars were trading with a yield to maturity above 4%, the yield of the highest-rated domestic bank Eurobonds was in the range of 5-6% per annum. And this despite the fact that rates on dollar deposits in Russian banks were at the level of 2% per annum,” says Kovalev.

“Among foreign exchange instruments, it is worth paying attention to corporate issuers with the maximum credit rating, which corresponds to the sovereign (BBB-). These include Eurobonds of Gazprom with maturity in 2022 and a yield to maturity of 5%, Gazpromneft with maturity in 2022 and a yield to maturity of 5.1%, as well as short-term bonds of Russian Railways with maturity in 2020 offering yield to maturity at 4%. It is advisable to buy these issues if you are ready to sit until maturity. Moreover, when external conditions normalize, you should also count on body growth, which will increase the return on investment,” advises Bezuglov.