Thursday, 3 September 2020

Investment - The Best Way To Invest 2000 Euros

 In the current low-interest rates, inflation eats up our fortune in the savings account. Therefore, let's look today which the best opportunities for investment of EUR 2,000, there are currently and whether they make sense.

First, a little explanation about the low-interest rates and inflation: The inflation in this country is about 2 percent per year. This means that next year we will be able to buy around 2 percent less with our money than today. So the so-called purchasing power decreases, although the assets in the current account remain the same.

In the past, you could counteract inflation with savings accounts, some of which had high-interest rates. If inflation was 2 percent but you got 4 percent interest, the real interest rate was 2 percent. At the moment, however, there is no or only very low interest in traditional savings. So we make a loss without even realizing it.

There must be alternatives? It is exactly like that. And today we're going to take a look at five of these alternatives and highlight their advantages and disadvantages.

1. Daily and fixed deposits as savings account alternatives?

We Germans love traditional savings. Still, and despite the low-interest rates. Unfortunately, we have the same problem with overnight and fixed-term accounts as with savings books: now or very low interest minus inflation leads to a negative development of your money. However, there is nothing to be said against having part of your money as a nest egg in such an account.

But exposing your entire capital to inflation is almost negligent. Since it does not currently look like anything will change in the interest rate situation so quickly, better alternatives are urgently needed.

2. Invest in stocks:

Stocks which are holdings in companies are also a great way to build wealth, although there are some barriers. First of all, the entry barrier for stocks is very high because you have to deal very intensively with the various companies before making your first purchase.

In addition, there are sometimes very high costs that make it hardly profitable to buy shares with small amounts. For example, if you want to put 2,000 euros in one or more stocks, depending on the broker or bank, you can quickly get 10 euros or more in fees.

If you want to diversify, you would have to buy multiple stocks, but that also increases costs. Here savings plans would still be an option. The minimum investment here is usually 25 to 50 euros per execution of the savings plan.

In addition, stocks are very long-term investments. For example, if you wanted to get your money in a few months but there is a downturn, you'd have to sell your stocks at a loss. In the long term, the stock markets will rise by an average of 6 to 8 percent per year. In the short term, it can, of course, go deep down.

3. Invest in ETF s:

If you're looking to get around the entry barrier in stocks, ETF s may be an option. ETF stands for Exchange Traded Funds, i.e. funds that are traded on the stock exchange.

You invest in funds, which in turn invest in many stocks from a special index. Example: An ETF on the DAX would invest in the 30 DAX stocks. An ETF on the American S&P 500 in the 500 US stocks from this index. So you are broadly diversified without having to be very knowledgeable.

The disadvantage: Your performance always develops almost 1: 1 with the index on which the ETF is based. So you cannot outperform or “beat the market”. If the overall market goes up 10 percent, your investment grows by this 10 percent. If it goes in the other direction, your investment falls by 10 percent.

4. Buy real estate:

For many, real estate is the safest investment. The problem: With our 2,000 euros, we cannot invest in real estate. The entry barrier is simply too high.

One possibility would be to save for a very long time in order to accumulate enough equity. This could then be used to raise outside capital and buy a property. The obligation, responsibility, and commitment to such a project are enormous.

5. P2P lending with Bondora Go & Grow:

With Bondora you can invest your 2,000 euros in P2P loans. These are loans that do without banks as middlemen. With P2P loans, many small investors give a loan together — and you can contribute a part and of course, benefit from the return.

The entry hurdle is low: You can get started from 1 euro — and if you register via this link, you will even get 5 euros for free! Bondora takes on the complicated part for you with Go & Grow, so you don't have to worry about anything.

Go & Grow's return is up to 6.75 percent per year. The interest is credited to your account every day. So you can see how your money increases for you on a daily basis.

The special thing: With Go & Grow you are quickly liquid — so you can get your money immediately with a few clicks and for a withdrawal fee of just one euro and transfer it to your account.

Conclusion: investing doesn't have to be complicated

As you can see, there are many ways to invest in 2,000 euros. Some are complicated, others have high entry barriers and the returns of all investments differ greatly. Investing doesn't have to be that difficult — Bondora shows that. It is only important that we look after our money ourselves and not leave it defenseless to inflation.

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