Last update 2121.01.06
Investors around the world are finding it difficult to diversify their portfolios in this unstable financial global environment 🌎, bringing savings accounts to light as an investment option to consider. Despite the very low-interest rates paid, savings accounts have been considered one of the safest investment alternatives. The logic behind this is simple: you deposit your money with a very long-term perspective in your savings bank account and your capital will grow slowly over time 🐌.
However, most people forget that when investing in savings accounts, they might be losing money, instead of making a good reserve of capital for college or retirement. How is this possible? Does this mean that you should not use a savings account?
This is what we are going to explain next🎓
- Is a savings account worth it?
- How can inflation shrink my capital in savings accounts?
- What are the alternatives to savings accounts?
- Should I consider forex as an investment?
- How can I get better returns by diversifying?
In this article, we will give you an analysis of savings accounts to help you assess whether it is a good investment solution.
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Is it worth a savings account? 🧐
Nowadays, some people believe that savings accounts are not worth it because they actually lose money. I will give some examples of this.
In other words, you lost $2, because every time your savings don’t grow at the same rate as inflation, you will effectively lose money. That is why savings are not worth it.
You can consider your balance to be positive, because you started with $ 200 and, in this case, earned $2. But when you spend your money, the price of products and services will cost more than your earnings.
How can inflation shrink my capital in savings accounts? 💸
Now, let me give you a real example to analyze the viability of savings accounts using inflation again as a metric.
In March 2020, food prices soared 0.4%, after rising 0.2% in January in the U.S. If you had money in savings accounts during the same period, you would have earned less than 0.1%. This means that you have lost at least 0.3% of the power of capital because your money has appreciated less than the price of food.
In that case, assuming a deposit of $ 1,000 in your savings account, your capital has shrunk to $ 997, because the rate of inflation was greater than the return on your savings. 😢
That is the force of inflation. The price of food, a movie ticket, a house, or a semester in college tends to rise over time, sometimes quickly and sometimes slowly. The fact is that many times, your return on savings accounts will be lower than the inflation rate and it can directly affect your personal savings plan.
If you are a retiree who lives on your savings or is saving money for college, you will not be able to maintain the same standard of living if inflation decreases your purchasing power with each passing year. This is especially true in the USA 🇺🇸, where medical costs tend to increase at a higher rate than many other expenses.
Inflation can hurt long before retirement. Suppose you are constantly saving for a specific goal, such as a fund for your children’s college or initial payment on a home. The purchasing power of your money can decrease while you save it.
Am I losing money in a savings account? 🧨
In short, yes, you probably are. If you are using a savings or checking account to keep most of your assets, in this case, over time you are losing money concerning inflation.
This does not mean that checking and savings accounts do not have a place in your financial plan because they do. In fact, having a savings account is a good way to diversify your investments. For this, it is important to have this portfolio diversification mindset, to find the best way to invest and allocate your capital.
Other disadvantages of savings account
Besides the impact of inflation on your capital, the trade-off for a savings account’s easy access and reliable security is that it won’t pay as much as other savings instruments. For example, you can get a higher return with certificates of deposit or Treasury bills, or by investing in forex, stocks, and bonds if your time horizon is long enough. As a result, savings accounts have an opportunity cost if used for long-term savings.
Besides, while the liquidity of a savings account is one of its main benefits, it can also be a disadvantage, as the immediate availability of funds can tempt you to spend what you have saved.
Savings accounts are also a bad choice for funds that you need to access frequently, due to the rules that restrict withdrawals transactions to around six times a month.
Alternatives to savings accounts ☺️
Once you know the pros and cons of the savings account, you can ask where to invest, how to diversify investments, and how much to invest in each financial instrument. Let us help you with that.
Well, there are several investment alternatives and a good financial advisor would be the right person to help you define your portfolio based on your goals. In any case, we will share some of the best ways to invest, based on popularity and past returns. It is important to note that all markets offer their own level of risk and success in the past does not guarantee future returns. Investing in virtually anything else inevitably involves more risk than an FDIC-insured account. But you can choose investments that are appropriate for your risk tolerance.
These are the financial instruments that offer higher rates of return that, on average, exceed inflation and result in the exponential growth of your money.
Keeping a year or two of money in a savings account as an emergency fund is always a good idea. But you need to consider your appetite for risk and investment diversification.
Retirees might want to consider Treasury Inflation-Protected Securities (TIPS). These securities adjust the interest payouts you get based on changes in the CPI. The principal payment you get back will also be adjusted for inflation. Even if prices go down over the investment period, you will still get back the original principal if you purchased the security when it was first issued. However, government bonds can be a better deal for small investors.
Moreover, the 7% interest rate you can earn in an investment account is much higher than the 2% inflation average. It means that your power of capital could be 5% higher when discounted inflation.
Investing a portion of savings in forex, precious metals, such as gold or silver, is another way to outrun inflation. Traditionally, people bought gold and silver coins. Today, there are also many precious metals ETFs available for investors. An asset allocation that adds a little bit of gold to a stock portfolio can also produce more consistent returns.
Should I consider forex as an investment? 😉
When considering forex as an alternative, there are even greater figures than stocks and index funds. With a daily turnover of $ 5 trillion and more than 400 million active traders, forex is the largest financial market in the world. Also, due to its high volume, it offers great opportunities. On the other hand, it is a high-risk market and can cause a loss of capital. For these reasons, investing in forex is generally recommended with the right trading tools or with available disposable capital.
The good news is that Wiseinvest has developed an Artificial Intelligence investment system capable of trading Forex automatically, starting at just $ 1 and anywhere. The automated AI trading is efficient, simple, safe, and time-saving. To invest in forex with AI, you just need a forex broker account and seamlessly link the AI trading. You don’t have to be a finance expert and waste time doing market analysis.
The average annual return on Wiseinvest’s automated AI trading system is + 43.21% from 2011 to 2020. You can check the performance of AI trading in real-time by clicking here.
Here is a chart to show what would have happened if you had invested $ 1,000 in 2011 with AI trading concerning the performance of S&P500.
As you can see, the performance of automated AI trading for 10 years was 1,262% better than the S&P500, and it was on average 2,927% better than savings accounts. During the same period of time, If you had started with $1,000 in 2011 on a savings account, in 2020 you would have $1,137, against $34,450 with AI trading in forex. The $33,313 difference easily beat the impact of inflation.
In all cases, we would like to emphasize that you need to consider long-term investment and past returns do not mean future success in trading. Besides, we do not recommend investing in Forex on your own.
The best investment ever, education
By far, the best investment you can make to be prepared for an uncertain financial future is to invest in education and yourself. One that will increase your future purchasing power.
Seeking quality education can not only help protect your salary but also make your career recession-proof.
Here at Wiseinvest, we offer free financial education to help people have a better financial life. You can learn more about investing and how to handle forex trading in our trading academy.
How to invest in forex with AI trading
You can diversify your investments and invest Automated with AI trading in forex. Check out the 3 simple steps to get started.
By trading forex automated with AI, you will save time and improve your performance without monitoring the market and managing trading platforms.
With Automated AI trading you do not need MT4 / MT5 and other trading platforms to invest in forex. All forex trades are automatically placed into your broker account every time that our AI system identifies a new worthy trading opportunity. You can monitor the AI trading performance in real-time directly on our dashboard.
Automated AI trading benefits
- Invest in forex from just $100.
- It is automatic, time-saving, and safe.
- An annualized average return of +42%* over the past 10 years.
- Setup in 3 minutes.
- Totally hands-free, from anywhere.
- Integrated with the forex best brokers.
- Your capital is protected by the brokers.
- Test with a risk-free practice account.
- Up to 60 trades per month.
- Automatic trades on average every 12 hours.
- You have full control of your broker account.
- Fast execution of trades.
- No commissions, no management fees.
- Automatic risk-management with low trading exposure of your capital (0.10% up to 0.65% per trade).
- No MT4/MT5 or other platforms required.
- Portfolio with 40 different automatic strategies.
- Trading results directly on our dashboard.
- Optional free forex signals.
- Trading alerts by email and Telegram.
- We have a team of professionals to support you.
Don’t you have a broker account yet? Our AI is integrated to trade automated with the brokers Oanda and FXCM. Click here to open an account with FXCM or here to open one with Oanda. Those are some of the best forex brokers in the world.
Why trust Wiseinvest instead of other trading solutions
These are the key reasons why forex traders at all levels trust us, rather than other trading solutions.
- Our automated AI trading is efficient, simple, safe, and affordable. You do not need MT4 or other complicated platforms to trade forex.
- We are a legitimate and reliable company with extensive experience in finance. We combine 19 years of trading experience and extensive academic research in the financial markets.
- Our AI outperformed the investment market with an average annual return of 43% over the past 10 years (2011-2020).
- The automated AI trading works with some of the best forex brokers.
- When using our AI solutions, all your money is protected by brokerage firms.
- We do not have access to withdrawals from our customers’ accounts.
- All of your data is encrypted and will never be shared.
- Savings account for a long period of time can lose you money. You may have the physical cash but the purchasing power of that cash has diminished and there is nothing any of us can do about it.
- Inflation tends to cut into a consumer’s purchasing power over time. Fortunately, there are ways of preserving the purchasing power of your savings. That means investing, but keeping your level of risk moderate.
- There is a variety of other markets you should consider to diversify your capital and invest, such as stocks, Forex, bonds, and Treasury.
- With Wiseinvest, you can invest in forex with automated AI trading. This is a hands-free artificial intelligence system that can invest automatically for you in a seamless way. It is simple, safe, and time-saving.
- You can get started free with AI trading. It is just open a forex broker account and link with AI trading in 3 minutes.
Disclaimer: Forex and Contracts for Difference (CFDs) are complex instruments and come with a high risk of losing money due to leverage. Forex trading is not suitable for everyone. You should consider whether you understand how forex and CFDs work and whether you can afford to take the high risk of losing your money.
The forex brokerages displayed shall disclaim the overall performance of traders in their platforms. Oanda warns that 76.8% of retail forex traders lose money trading CFDs. XTB warns that 80% of retail forex traders lose money trading CFDs. FXCM warns that 74.74% of retail forex traders lose money trading CFDs.
The performances aforementioned are not related to Wiseinvest AI forex trading and AI forex signals system. You can check the performance of our AI forex system on our dashboard.