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> The rates that this article is talking about is bank savings, so if you're talking about retirement or child education, that is usually many years away. For t

by zapnuk 7y ago

> The rates that this article is talking about is bank savings, so if you're talking about retirement or child education, that is usually many years away. For that money you will need to put it into a portfolio of stocks and bonds, because if you don't inflation will eat away at it over time. In that case, why should the customer need to decide on a portfolio? Why doen't bank to that internally and offer risk-free, variable rate investments for their customers? The expected stock return is 5-7% p.a., why can't banks offer 3-4%? > If it's in the time frame of 2-5 years, then a term deposit will be fine: Except that it's not. In germany I know of two popular alternatives term deposit ('Festgeld', more flexible - can be extended) and savings bond ('Sparbrief'). The interest rate of term deposites is 0,1%, for saving bongs it's 0.1-1%. Both are considerably lower than the inflation rate of approx 1.5%. Sure, there are different fond/stock based alternatives - but they often carry risk.

throw0101a 7y ago
> Why doen't bank to that internally and offer risk-free, variable rate investments for their customers? The expected stock return is 5-7% p.a., why can't banks offer 3-4%? Because banks are banks and investment companies are investment companies, and there are generally regulations about mixing the two (the removal of those regulations helped along the Financial Crisis). And just because something is "expected" does not mean it is guaranteed, further those expectations are averaged out over several years. If you want safety, you will have to pay for it: > Of course, all this exists today. If you want to hold gold and watches and sentimental things at a bank, you pay to rent a safe deposit box. If you want to hold oil or grain to use it or sell it next year, you can pay for storage in a tank or some other facility. [...] > Well, it’s important to remember that money in the bank isn’t really something you have. It’s something that you are owed. When you log into your bank and see that you have $10,000 in your savings account, what that means is that your bank owes you $10,000. [...] > In other words, to store money at a bank requires the existence of some other borrower who will pay the bank. As such, just as you’ll pay more to store grain when grain is abundant and warehouse space is scarce, you have to pay more to hold money when savings are abundant but demand for borrowing is scarce. [...] > In the meantime, there’s lots of money out there and a limited capacity to store it all. So increasingly, savers are going to have to pay for money storage services. And although it’s not much consolation, we can at least remember that whether it’s fees for oil tanks, safe deposit boxes, security guards, insurance, or wealth managers, there's nothing unnatural about being forced to pay to preserve your wealth. [...] * https://www.bloomberg.com/news/articles/2019-08-08/the-non-weirdness-of-negative-interest-rates https://www.bloomberg.com/news/articles/2019-08-08/the-non-w... > Sure, there are different fond/stock based alternatives - but they often carry risk. If you want more return, you will have to take on more risk. Buy a portfolio of 10% stocks/equities and 90% bonds. Vanguard actually offers an ETF very close to this called VCIP in Canada: only 20% stocks/equities. If you want safety you will have to pay for it, with low or negative rates. If you want returns you will have to take some risk. Suck it up.

by zapnuk 7y ago

throw0101a 7y ago

> Why doen't bank to that internally and offer risk-free, variable rate investments for their customers? The expected stock return is 5-7% p.a., why can't banks offer 3-4%? Because banks are banks and investment companies are investment companies, and there are generally regulations about mixing the two (the removal of those regulations helped along the Financial Crisis). And just because something is "expected" does not mean it is guaranteed, further those expectations are averaged out over several years. If you want safety, you will have to pay for it: > Of course, all this exists today. If you want to hold gold and watches and sentimental things at a bank, you pay to rent a safe deposit box. If you want to hold oil or grain to use it or sell it next year, you can pay for storage in a tank or some other facility. [...] > Well, it’s important to remember that money in the bank isn’t really something you have. It’s something that you are owed. When you log into your bank and see that you have $10,000 in your savings account, what that means is that your bank owes you $10,000. [...] > In other words, to store money at a bank requires the existence of some other borrower who will pay the bank. As such, just as you’ll pay more to store grain when grain is abundant and warehouse space is scarce, you have to pay more to hold money when savings are abundant but demand for borrowing is scarce. [...] > In the meantime, there’s lots of money out there and a limited capacity to store it all. So increasingly, savers are going to have to pay for money storage services. And although it’s not much consolation, we can at least remember that whether it’s fees for oil tanks, safe deposit boxes, security guards, insurance, or wealth managers, there's nothing unnatural about being forced to pay to preserve your wealth. [...] * https://www.bloomberg.com/news/articles/2019-08-08/the-non-weirdness-of-negative-interest-rates https://www.bloomberg.com/news/articles/2019-08-08/the-non-w... > Sure, there are different fond/stock based alternatives - but they often carry risk. If you want more return, you will have to take on more risk. Buy a portfolio of 10% stocks/equities and 90% bonds. Vanguard actually offers an ETF very close to this called VCIP in Canada: only 20% stocks/equities. If you want safety you will have to pay for it, with low or negative rates. If you want returns you will have to take some risk. Suck it up.