Why the guaranteed investment can cost you money

The word guarantee is magical. It can attract the attention of many people. It is often used in marketing to influence your decision making. Is the word investment guarantee a higher yield?

Guarantees can often reduce revenues


I’m not a psychologist and I’m not an economist. However, I notice what causes decisions made by people in the past because something was guaranteed.

I can also be specific. I will select a few examples where it is confirmed in practice that a guarantee can reduce your revenues.

The second pillar – the least guaranteed funds

The second pillar - the least guaranteed funds

Most people have money in guaranteed funds that earn the least in the second pillar.

This is the distribution of assets in funds in the 2nd pillar. Nearly 77% of savers in the second pillar have their money in guaranteed funds.

How much do these funds earn? It’s a misery. In the picture below you can see how badly guaranteed funds are in the 2nd pillar. which are not guaranteed and are not even managed, earn much more. I mean index funds that just copy a particular stock index. These are their returns.

It does not matter in which fund you have your money.

Guaranteed bank deposits are historically the lowest

Guaranteed bank deposits are historically the lowest

Most people have money in guaranteed product banks such as term deposits, current accounts, and savings accounts.

Interest in term deposits is at a historical low. Interest has never been so low. I will not even write about savings and current accounts. It is a great misery.

Slovaks have more than € 34 billion in banks. If I am to need and do not miss any zeros, this number looks like this 34.171.415.000 EUR.

Where do I get this number? I found it in NBS statistics and it’s date of 31.7.2018. You can always check the current date here on the NBS website.

3-year term deposit revenue looks bad. On the left are interest on deposits up to € 10,000 and on the right above € 10,000. In both cases it is quite low, but guaranteed