Czech Banks Offer ~1% Interest
Inflation is 12x higher than what Czech banks offer.
In the Facebook Group ‘Living in Brno’, a member posed the following question:
Inflation is greater than savings account interest
Source: Take-profit.org1
As of today, inflation in the Czech Republic exceeds 12%, which is 12x higher than what your money is earning sitting in a bank savings account. While the financially responsible person in you decides to save and save because products and services are 12x more expensive, there will inevitably come a time when you say “damn, I need more money to do things.”
Undoubtedly, inflation will be corrected and decreased in the coming years…yes, years. The only hedge against inflation is investing. This can mean investing in stocks, real estate, franchises, cryptocurrency, startups, and anything that allows your money to grow. Investing does carry the risk of losing money, and so the fear is that not only could you lose money from investing, but also, the value of your money is being lost to inflation.
A popular opinion amongst passive investors (investors who manage their investments once or twice a year) is to invest in funds. A fund is a pool of money contributed by individual investors and this fund is managed by a ‘fund manager.’ The fund manager then uses the total investment capital to buy several different stocks. The primary reason to invest in a fund is that you can make money at a slower rate and not have to do so much research on individual companies.
Two popular funds are ETFs and mutual funds. ETF stands for ‘exchange traded funds’ and this fund allows investors to invest any amount of money and quickly sell your investment at any given time. Mutual funds differ in that you cannot sell your investment so immediate. The fund usually has a rule that buying or selling a mutual fund occurs at the end of the trading day, thereby missing out on any action that occurs during the trading day. But that’s ok. Mutual funds, like ETFs, are intended to be long-term investments.
This is an ETF that invests in the health care industry. According to this financial chart, if you invested 10 years ago at a price of $65 USD, then by April of 2022, your investment grew to $260 USD (400% return on investment). Yes, there were tumultuous times like in March 2020 where all financial markets collapsed, but as you can see, the recovery looks like a hockey stick.
Fin-Tech apps are empowering individuals
In 2009, my first visit to the Czech Republic, individuals could invest if they used one of the popular banks, and even then, the access to financial markets was limited. In essence, the barriers to invest were high in 2009.
In 2022, there are a handful of financial-technology apps that make it possible for anyone to invest in the most popular financial markets, including the biggest one of them all, the US Stock market. What’s even better, you don’t need 5,000 or 50,000 CZK to start. You can make your first investment with any amount.
The most popular fin-tech apps to start investing are Revolut, Passfolio, and Degiro.
To learn more about investing your first koruna, take our beginner’s online course where you will create your own portfolio and begin investing in 30 days. Use the code 24hourjournal to receive 24% off the enrollment. Visit 24hourinvesting.cz to sign up.