Why does bank deposit play an important role in long-term investment strategies?
It is difficult to talk about securing large capital against inflation solely by buying securities. This is usually an unrealistic perspective due to fluctuations occurring in the business cycle. Securities gain value during the bull market and lose during the bear market.
For this reason, an individual investor should constantly look for ways to diversify assets, because this is the only way to properly protect money. Opening bank deposits is characterized by high simplicity, a certain but small profit, and additionally full protection of funds against inflation. For now, inflation does not show a tendency for dynamic growth, but taking into account historical economic conditions, the situation will sooner or later reverse. At low inflation, it pays to invest in securities, corporate bonds and even derivatives, provided you have solid risk tolerance. The bank deposit turns out to be much better with interest rates rising even before the inflation hit. In this way, you are able to generate a certain profit of even a few percent.
Keep a bank deposit even just in case when investing
It is not worth giving up a bank deposit for several important reasons. The first is some capital withdrawal if you want to take a vacation from investment. You can be sure of generating small profits, but with large capital you will most often get preferential interest rates on savings deposits.
This is a classic practice found in retail banks, which you should familiarize yourself with. In addition, you do not run the risk of losing capital through inflation and have greater psychological comfort. The bank deposit is part of the diversification of individual investors’ assets. With less risk tolerance, keep a bank deposit slightly less than 50% of funds, but do not overdo it with shifting all capital to highly risky instruments. A bank deposit is always a very good security cushion that you can reach for without great losses or economic consequences.