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Keeping cash safe
Written by: René Jakl
Photo by: Ivan Malý
Following the collapse of many investment
funds, savings and loans, and other financial institutions, people
are more concerned about the safety of their investments than about
astronomical returns. For some, the name of a renowned financial
group suffices, while others want legal insurance for their investments.
The safest methods for depositing money are bank deposits in current
accounts and term deposits, as both are insured by law. According
to Zdeněk Sluka, the director of consulting firm Sophia Finance,
90% of a client's deposit is insured (in the event that the bank
goes under), but the maximum sum is the equivalent of EUR 25,000.
Deposits in savings and loans are also insured by law, but as opposed
to banks, it is limited by the amount of assets in the deposit insurance
fund to which the institution contributes. Although this fund was
nearly empty, the state compensated clients of collapsed savings
and loan institutions on the basis of a parliamentary decision.
Such a solution need not be repeated in the future. The conditions
are the same for insuring building savings accounts as for bank
deposits, because, as Sluka explains, every building savings institution
is also a bank - as well as the most profitable, low-risk way to
save up to CZK 1,500 per month.
Investments in bond and equity funds are not insured. In general
investments in securer state bonds carry the lowest risk, while
betting on shares in small companies or emerging markets stocks
is the riskiest. According to Sluka, an improvement mortgage bond
is secured by a real estate lien, but it is otherwise uninsured.
Such a bond's yield is tax exempt. Assets deposited in supplementary
pension insurance are not insured either. "This is a very conservative
type of pension savings, supported by state contributions and tax
breaks. Despite state support, I would recommend such a plan mainly
for investors over 40," says Sluka. "A younger investor
can employ less conservative savings methods, probably enjoying
There is no such thing as ideally secure investing. Money under
the mattress or in a home safe loses value due to inflation, and
investments in legally insured deposits are not completely secure
- that depends on the financial stability of the state insuring
them. "Let us keep the recent situation in Argentina in mind,"
This article was prepared in cooperation with Sophia Finance,
s. r. o.
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