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Amortize loans or invest? see solution

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Amortizar créditos ou investir? Veja a solução

















At the end of July, there were 82.7 billion euros of customer deposits in the vaults of Portuguese banks. The data was released by Banco de Portugal (BdP) and represents the highest value ever, up 7.2% compared to the same month in 2021.

The amount that can lead the Portuguese to make a decision: to pay off debts associated with a loan, namely housing, or to invest in financial investments. But before you make a decision, do some math, because it’s not always easy to choose the best solution.

Between amortization and investment, the consumer can always save either through the interest he stops paying on the loan or through the income from the investment. Of course, in the first place in the analysis should be the profile of the family and what they value most: whether it is reducing expenses when paying off a mortgage or personal loan, whether it is the security of future times.

In the case of mortgages, given the low interest rates currently practiced, in most cases it is not worth paying, especially if the spread is very low – a common situation for loans taken up to five or six years ago.

In this case, the money will do more good if it is invested in a risk-free application, but then the challenge is to find the product with the best rate of return (see column on the side). However, if the Euribor rises, depreciation may be the best option. In the case of a personal loan, it is almost always preferable to amortize it due to the high interest rates involved.

How to compare rates The first golden rule is to compare interest rates on a loan and an investment product annually, as the situation can change in a short time.

The formula is simple: analyze the interest rate applied to the loan – TAN (index rate plus spread) – and also take into account the rate of the application you are about to file, TANL (net nominal annual rate). To better understand this analysis, consider the TAN of a loan as the cost you incur for the loan and TANL as the return on investment. Knowing the two rates, choose amortization if TAN is higher than TANL, since the savings realized in interest payable on the loan will be greater than the return on investment.

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If you have a fixed rate mortgage, in principle you don’t have to worry about rate fluctuations as a result of the Euribor hike, making comparisons easier. However, keep in mind that in this case, the fee for early repayment is higher: 2% compared to 0.5% for floating rate loans.

If you repay part of the debt, it must match the payment due date. If the reimbursement is motivated by death, unemployment or business travel, it is exempt from commissions. Banks may not charge additional fees or increase the penalty to the maximum on contracts that provide for a lower percentage or exemption. And these rules apply to new and old contracts, for the purchase, construction and work in own and permanent housing, resale or lease and acquisition of land to build your own home.

Indeed, with a partial repayment of 20,000 euros, the commission cannot exceed 100 euros for a loan with a variable rate and 400 euros for a loan with a fixed rate. You have up to seven working days to inform the bank by registered mail with acknowledgment of receipt.

However, if you have an adjustable rate mortgage with a spread of up to 2.5%, then you can invest in a risk-free application (see column on the side), capitalizing on interest to increase income. In the case of a personal loan, amortization is almost always the best alternative.

Risk free investment products

Annual returns of 3%, 4% or even 5% on guaranteed capital and low-risk savings products are a thing of the past. The interest currently charged is at a low level and there are banks that no longer pay out term deposits. However, look at the alternatives.

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Term deposits

If the simplicity of this savings product is one of its strengths, then the reward rate offered makes the app less and less attractive. Although it has been losing followers in recent years, it is still one of the favorite savings instruments of the Portuguese.

Consumers’ low monthly income, competition from other savings products, and reward cuts explain this downward trend.

Savings certificates

This product, which in previous years was considered a real alternative to savings, is increasingly losing ground due to the low rate of return. It is calculated based on the three-month average Euribor observed over the previous ten business days plus 1%. But expect small rewards.

Treasury Growth Savings Certificates

The interest rate increases: 0.75% (gross interest) is paid in the first and second years, which rises to 1.05% in the third year, 1.35% in the fourth, 1.65% in the fifth and 1.95% in the fifth year. sixth, to reach 2.25% last year. From the 2nd year, the interest rate increases by a premium, depending on the real average growth of the gross domestic product (GDP).

Investment Tips

1. Consider the unexpected

Monetize added value. Before investing, consider whether you really need this money. If you come to the conclusion that you don’t need it, you can start using that extra money to make the best use of it. Don’t forget that you should set aside three to six months of money for household expenses so that you can deal with any unforeseen circumstances. This applies, for example, to health care costs.

2. Investments for the long term

Stock market. Always think long term, especially if you are thinking about betting on the stock market. The explanation is simple: the more time you spend on your investments, the more you can risk and the more you can monetize. You should invest for at least five years – ten years is good, 20 years is even better so that the amount invested in stocks is maximum and can minimize temporary losses.

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3. Don’t invest everything in the same

Diversify your investments. Not putting all your eggs in one basket is one of the golden rules you should follow when thinking about investing. This means that you do not have to own only one security or securities of companies whose profits depend on a similar business. In the event of a change in the legal regime, your assets may undergo profound changes.

4. Don’t bet on something you don’t understand.

Information. If you don’t understand the product a company is selling, don’t buy stock. If you want to invest in government debt but don’t understand how Treasury bonds work, buy savings certificates. If you do not understand the description of the investment policy in the fund’s prospectus, do not subscribe. If the term deposit offered to you has an interest rate formula, exchange it for a deposit with a simple interest rate.

5. Don’t go into debt

Compare offers. It is a mortal sin for an investor to finance himself in order to invest. If your investment depreciates, the loan has a loss multiplier effect. If your investment grows, the loan will absorb the effect of profits. Whatever the outcome, investment loans never work. Only one entity always wins: the bank, regardless of whether the investor wins or loses.

6. Consider your profile

Take a risk or not. If you have a conservative profile, the investor intends to keep the amount invested and choose low-risk products. If you are moderate, you are already ready to take significant risks in investments and your choice, for example, in real estate funds. If he is dynamic, he takes on high risk in stock decisions and bets.



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Bankers demand 6.25% pay rise at ‘breaking point’ and refuse further layoffs – ECO

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Bankers demand 6.25% pay rise at 'breaking point' and refuse further layoffs - ECO





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Woman with fake belly caught smuggling hundreds of semiconductors (already worth 500 times more)

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Woman with fake belly caught smuggling hundreds of semiconductors (already worth 500 times more)

Sanctions and supply chain issues have created a parallel market in China, where these chips are sold for 500 times the market value.

Chinese customs officials caught a woman trying to smuggle semiconductors inside a prosthetic belly while pretending to be pregnant. This arrest sheds light on the reality of smuggling that has emerged in the world’s second-largest economy following the sanctions imposed by the United States of America.

According to bloomberg, a woman was caught by the authorities while trying to enter Zhuhai via Macau on November 25. According to customs authorities, the suspect had more than 202 processors and nine smartphones.

The woman came to the attention of the authorities when she was asked what month she was pregnant. “She said she was five or six months pregnant but she had a big belly that looked like she was in her third trimester,” Chinese officials explained.

The economic crisis caused by covid-19 and all the problems that have arisen in the supply chain have opened the door to the emergence of a black market in semiconductors in a country that needs these advanced chips to produce millions of products.

The situation has worsened recently as the Joe Biden administration tightened sanctions on China, focusing on developing advanced technologies, especially for military use.

According to the North American economic publication, the situation is so serious that the prices of these devices reach values ​​up to 500 times their market price, which creates ideal conditions for creating an entire parallel market with telecom operators and resellers.

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Reduced provider discount in December due to falling fuel prices

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Reduced provider discount in December due to falling fuel prices

The Ministry of Finance reported that in December there is a decrease in the ISP discount by 3.9 cents per liter of diesel fuel and 2.4 cents per liter of gasoline, taking into account falling prices.

The guardianship statement states that, as announced, “the mechanism applied in the ISP is equivalent to reducing the VAT rate from 23% to 13%, and the compensation mechanism through the ISP reduces additional VAT income as a result of the changes. in fuel prices remain in effect.

Thus, taking into account the evolution of diesel and gasoline prices, “these temporary measures result in a reduction in the ISP rebate of 3.9 cents per liter of diesel fuel and 2.4 cents per liter of gasoline. a discount of 17.1 cents per liter for diesel ISP and 15.4 cents per liter for gasoline ISP,” the same note reads.

On the other hand, “the carbon tax update will be suspended until the end of the year,” and “taking into account all the measures in place, the reduction in the tax burden is 27.3 cents per liter of diesel fuel and 24.7 cents per liter of gasoline. “.

The government’s rebate mechanism assumes that a decrease in the price of fuel results in an increase in the Tax on Petroleum Products (NPT) due to a drop in VAT revenues.

“Measures to mitigate the increase in fuel prices remain in place in the month of December, while the government continues to support all consumers by reducing fuel taxes,” the ministry reminded.

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The ISP’s rebate, equivalent to a 13 percent VAT rate cut, was due to run until September 4 but was later extended through the end of the year as part of the government’s family relief package due to price hikes.

Average fuel prices have returned this week to below pre-war levels in Ukraine on Feb. 24, with a 5.1% drop for petrol and 4.1% for diesel calculated by ERSE.

According to the “Weekly Report on the Surveillance of Selling Prices for the Public” published on Monday evening by the Entidade Regladora dos Serviços Energéticos (ERSE), “For the week of 28 to 4 December, the effective pre-tax price is 0.860 euro/l. [euros por litro] for straight petrol 95 and 1067 euro/l for direct diesel”, which after tax is 1660 euro/l and 1685 euro/l for straight petrol 95 and straight diesel, respectively.

These figures are comparable to average prices of 1,816 euros/l for 95 straight-through gasoline and 1,660 euros/l for direct diesel filled on February 24 when the Russians invaded Ukraine, according to the Directorate General of Energy and Geology (DGEG). ).

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