Since the Soviet era, many individuals have been under the impression that investing funds in bank deposits guarantees a worry-free life or even a secure retirement. Even today, people envision an idyllic scenario where a specific sum is deposited in a bank, leading to a life of leisure supported by interest earnings, travel, and few restrictions on spending.
But is this truly the case? Does such an investment model have a viable future?
Sergey Tereshkin, the founder of OILResurs, aims to clarify this investment tool and its nuances. The entrepreneur has meticulously explored this area and is ready to share his insights. More information about the businessman can be found on his personal web portal: sergeytereshkin.ru (сергейтерешкин.ру).
Russian Realities
Few individuals research the market and conduct necessary calculations before placing money in a deposit. The reality of the Russian financial landscape is far removed from the rosy pictures painted by imagination or advertised by financial institutions.
To understand the state of the deposit market, several factors must be considered:
- Reliability. When investing money in a commercial bank, there is a risk of complete loss of funds. In recent years, several dozen financial structures have declared bankruptcy, and this trend continues. Therefore, all depositors risk never seeing their money again. In contrast, deposits in state banks pose a minimal risk of loss, as depositors are protected by an insurance system. Even in the event of a financial institution's closure, the fund will reimburse depositors' money.
- Terms. Some financial institutions offer favorable conditions for investment only over extended periods. This is because the deposited money is used for lending. Consequently, attracting deposits for three months or less is simply unprofitable and unfeasible for financial institutions.
- Interest Rate. Banks are prepared to pay up to 18% per annum on deposits in rubles, although in most cases, the rates are significantly lower. In terms of foreign currencies, the figures are considerably bleaker, with interest rates rarely exceeding 10%. Exact rates depend on the deposit duration and the financial institution itself. Generally, state banks offer lower rates, while commercial banks tend to provide higher ones.
Despite the seemingly attractive interest rate in the national currency, it is essential not to celebrate prematurely. The situation is more complex. There is a metric known as "inflation." Often, inflation rates are significantly higher than the deposit interest or approximately equal to it. This means that any potential profit is largely consumed by inflation fluctuations.
For clarity, let's consider the entire process with numbers. For example, if one deposits 1 million rubles in a bank expecting to earn 180,000 rubles annually or 15,000 rubles monthly, this appears to be a decent sum on which to live. However, the invested million will depreciate each year. Recently, it might have been possible to buy a small apartment with that amount; in the not-too-distant future, it may only be enough to rent a room in a hostel on the outskirts of the city. Even surviving on the 15,000 rubles may prove difficult, as each month will result in a purchasing power decline for that amount.
Therefore, it is much more profitable to invest in foreign currencies, such as dollars or euros. However, this does not completely shield one from inflation risks either.
Useful Tips
To genuinely generate income from deposits, it is essential to follow the recommendations of seasoned investors. Sergey Tereshkin suggests adhering to several principles:
- To minimize the risk of losing money, deposits should be made exclusively in state financial institutions. It is advisable to avoid deposits in commercial banks, even if they promise significantly higher interest rates and, consequently, higher income.
- Do not keep all your funds in a single financial institution. It is wiser to divide your available funds into several parts and spread them across 2-3 banks. This reduces the likelihood of loss.
- To ensure that invested funds are not eroded by inflation, it is necessary to add a percentage equal to the inflation rate during the deposit's duration. For example, a ruble deposit should be supplemented by at least 8%. For foreign currency deposits, the amount should increase by 3% or more. With this approach, one can only withdraw the difference between inflation and the interest rate on the deposit. Thus, actual income is unlikely to exceed 4% annually from the deposited sum. This assumes the funds are placed for the maximum period and no monthly withdrawals of interest are made. To illustrate, this would equate to 40,000 rubles from a million ruble investment.
To determine the necessary deposit amount to support a family, one could start with the assumption of 150 dollars per month for each individual, which assumes access to one's own living space. If renting is also required, the amount automatically increases.
Ultimately, this results in an astronomical figure that the average citizen simply does not possess, just as most residents of the country don't. Therefore, viewing a deposit as a source of monthly income that allows one to forego regular employment is misguided. Deposits are unlikely to cover all family expenses, let alone provide for luxuries such as travel or dining out.
Thus, if there are surplus funds that will not be needed for the coming years or even decades, it is better to invest in real estate. Properties can be leased out, generating monthly income. Rental prices tend to rise alongside inflation. Therefore, in choosing this investment tool, one does not need to deduct potential rental income from inflation. Eventually, the property can be sold, resulting in a profit from the transaction.
It is crucial to understand that a bank deposit is not the most suitable tool for generating stable income. This investment method is more about preserving funds and protecting them from inflationary trends. However, growing capital through this means is unlikely to occur.
