Savings are earning interest again. Savings accounts at Swiss banks are now earning interest rates of 0.5%, 0.6%, 0.8%, and sometimes even higher. Gone are the days of negative interest rates.

Happy days are here again for savers. Savings, no (market) risk, and an attractive interest rate – so all is good?

Not at all.

With inflation above 2% (August 2023) and interest rates below 1%, the result is a loss of real value of more than 1%.

This is even worse than in the negative interest phase, when interest rates were 0% to -0.75%, but we had hardly any inflation.

So the positive interest rates are only half the story. Anyone who leaves their money lying idle instead of investing it is losing real value, day after day.

And there is another reason for this, in addition to inflation: namely, the (too) low interest rates that banks pay and the fees that banks introduced in the negative interest phase. The banks receive 1.75% for funds deposited with the SNB. However, they only pass on a fraction of this. So saving may be risk-free, but then come the fees. At the same time, banks charge the full interest rate plus a margin when granting mortgages. This also explains why, for example, 2/3 of cantonal banks made record profits in the first half of the year.

The situation has reached the point that consumer protection agencies and political players have now become involved.

BOTTOM LINE: the positive interest rates are only half the story.

Despite positive (nominal) interest rates, it is important to check carefully:

How much liquidity do I really need? How much should I leave in my savings account, and how much should I invest?
How much is my interest rate in real (not nominal) terms, taking inflation into account?

This is because, in addition to supposedly lucrative savings rates, the bond market also offers extraordinary opportunities with yields well above inflation. The rise in interest rates has caused many bonds to trade below par. Returns of up to 15% over 4 years in the investment-grade segment and more than 18% over the next 2 ½ years in the high-yield segment are an attractive prospect. And that’s in Swiss Francs.

And many stocks also have further potential and pay solid dividends far above inflation.

It depends on a good mixture and a good selection.

Please do not hesitate to get in touch if you require any further information or details.

For partners: Please do not hesitate to get in touch if you or your clients require any further information or details.