Higher interest rates are luring investors into overnight deposits and similar products. But building wealth over the long term takes more momentum than that. Here's how you can bring the stock markets into your investing without taking on too much risk.
Interest rates are currently as attractive as they've been in a long time. quirion, too, lets investors share in this. Interest offers make the most sense when they're used as a "parking spot" for money that needs to stay available in the short term. But if you want to build wealth, you shouldn't pass up the return opportunities of the capital markets.
True, some might object: better a bird in the hand than two in the bush. You simply pocket the interest and know exactly what to expect. But it's not quite that simple. Sure, unlike securities, interest products such as overnight deposits don't have price fluctuations. The interest rate itself, however, can certainly change over the course of the investment period.
For banks' overnight deposit offers, the key interest rates are only a rough point of reference anyway. It's up to each bank to decide how much interest it pays on overnight deposits and on what terms. An analysis by the consumer portal Verivox from July 2023 found that of the 738 banks with overnight deposit offers that were evaluated, 141 still paid their overnight deposit customers no interest at all. At that point, the average interest rate on nationally available overnight deposit offers stood at 1.31 percent. By contrast, the key interest rate at the end of July was 4.25% - more than three times as high.
Keep your goals in view
For a short-term investment horizon, attractive promotional offers or money-market-like products can be a good fit. When it comes to building wealth, however, you shouldn't rely on interest rate developments. History has shown that the stock markets can realistically deliver average returns of six to seven percent over longer periods. This upward trend in the stock markets rests on the long-term growth of the global economy.
A study by the London Business School and the Credit Suisse Research Institute also shows that, over the long term, stocks compare well with other forms of investment. It examined the performance of various asset classes from 1900 to 2022. Over this period, stocks outperformed bonds and money market instruments in all 35 markets studied. On average, the performance of global stocks exceeded that of money market instruments by 4.6 percent per year and that of bonds by 3.3 percent per year.
Differences that add up
Even a rough calculation example, one that doesn't refer to any specific investment products, demonstrates the point: differences in returns have a major impact, especially over the long term. At an assumed return of 2 percent, €10,000 becomes, purely mathematically, around €13,500 after 15 years - that's 35 percent more. At a return of 4 percent, it's already €18,000, a gain of 80 percent. And at a return of 6 percent, it's around €24,000, a growth of 140 percent.
No one can guarantee particular interest rate or price developments. Nevertheless, with the right investment strategy you can increase the likelihood of participating in the long-term average returns of the world's stock markets. The "magic word" for this is "diversification." The global ETF portfolio from quirion contains around 8,000 stocks from more than 70 countries. On top of that, quirion adds bonds depending on your risk profile. As a rule, this reduces price fluctuations even further. In this way, quirion opens up the return opportunities of the capital markets for the widest range of risk appetites.
Investing in line with your risk profile, conveniently and even without prior knowledge: that's something especially appreciated, by the way, by those who already use a digital wealth management service like quirion. Getting started is easy. After all, the benefits of digital wealth management are also available as a savings plan - at quirion starting from an investment amount of just €25 a month.
