If your passive income beats inflation rate, deposit might be a better choice.

[Marcellin9]

My previous post "Use your money wisely. Invest or deposit ?" is a very hot topic which receives over 3000 views and more than 240 replies. I read all of your replies and summarize to one common advice: invest in Bitcoin rather than deposit in banks. To be frank, I totally agree and believe this is a great option (of course not put all eggs in one basket). The question is that most people say that 3% of deposit interest rate is nothing compared to inflation rate so deposit would be the last option if they had that amount of money. Well, in real life, I think 3% is quite good enough for deposit only if your other passive income combined is more than your expenses. Please let me explain. Your passive income is $1000 per month, and your salary is $1500/month. Passive income comes from the rental of the house your parents gave you or left you. Salary is from your regular and stable job. Your monthly expenses come to $1000 to $1500. The annual interest from the $100,000 is $3000, which means $250 per month. The rental income plus the interst sums to $1250/month and this money can cover your monthly expenses. In this situation, why don't you deposit that amount of money and feel no worries about your finances ? See, your passive income here can pretty much offset the inflation but that 3% is actually a compound interest rate which brings you more money every year. Plus, your salary of $1500/month, can also be saved in your bank account to earn more money. You know my point here ? I am trying to implement this deposit thing in real situation and find a possibility to benefit from.

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[Poker Player]

You sound like someone who makes a lot of guesses about a hypothetical situation in which he is not. A passive income of the amount that speaks, what people usually do is spend it instead of depositing it in the bank. There are two exceptions to this:

1) People so rich that passive income far exceeds their level of consumption, so they reinvest it, but never in a shitty bank deposit, unless for a short period of time (to buy when they see an opportunity in RE or shares of a company).
2) People still in the accumulation phase, who in this case reinvest the liability but in the same way as 1). It doesn't make sense to put it in a deposit unless it's short term.

[hugeblack]

Your words are good on the one hand, but suppose, for example, if inflation continues at rates such as 10%, then within 5 years you will not have enough capital to cover these expenses, or rather, your capital will be consumed so that it will not be able to generate additional income for you.
So the issue is not the return on investment, but rather the nature of that investment, as its value decreases faster than the interest on it.
Your words will make sense if we are talking about gold ROI.

[Fiatless]

Your words are good on the one hand, but suppose, for example, if inflation continues at rates such as 10%, then within 5 years you will not have enough capital to cover these expenses, or rather, your capital will be consumed so that it will not be able to generate additional income for you.
So the issue is not the return on investment, but rather the nature of that investment, as its value decreases faster than the interest on it.
Your words will make sense if we are talking about gold ROI.

3% interest rate from deposit is nothing compared to the inflation in most developing nations. Some nations are experiencing up to 30% inflationary rate and the interest rate from bank deposit is just useless. The best option for me is to invest on a product that have a high rate of return. Investing on a product that its cost increases with the inflationary rate might be a good option. I might think of investing in Bitcoin and patiently wait for the bull run. Bitcoin has proved to be a very good investment over the years.

[pooya87]

Generally speaking you should never hold more fiat than you need (eg. emergency funds for an emergency situation). After you deduct your expenses, however much fiat you are left with you should invest in something that can be considered a store of value while trying to diversify as much as you can.
In my opinion it doesn't matter how much your income is and how much interest rate your bank gives you, you still need to invest your fiat into something better.

Bitcoin, gold and real estate are the best choices in my experience. Things like stocks depend a lot on the economy and could crash hard while the risk of the same scenario is lower in those 3 markets I mentioned (it is not zero though).

[palle11]

Whatever percentage interest rate that we aim at in deposit or investment, we should invest in product that rises with inflation time and not policy ban. Product that are decentralised like bitcoin should be the best choice. If you have investment in rentage of house, you are also sure to meet up with the inflation rate. I think it is majorly about how we can take the advantage of inflation and not really to what percentage and guesses we make. We need some reality to survive in highly inflated economy. Don't invest in perishable things.

[BitDane]

@OP you already stated that investment in Bitcoin will give a better yield then why bother advising people to deposit their money on banks?  Regular employee cannot avail the 3% interest per annum, they often stay in the bracket of 0.125% to 1% and besides 3% annual interest is somehow impossible in my country.


Take note only Php500,000 (approximately $9000) is insured on the deposited amount so I think it isn't worth the risk of putting huge amount of money on the bank.  If you have a good amount of money, I believe it is better to set up a small business or invest it somewhere else than putting it on the bank. And if you wanted to bank your money why not be your own bank by converting  your cash to Bitcoin and be in self custody.

[so98nn]

Yeah even with the hiked FD rates are stupid investment these days. The highest I am seeing in my country is 7% per annum. But the issue is bitcoin can give us more than that in blink of an eye or it can take everything that we have. The factor that affects is: time. The more you wait on the bitcoin the more rewarding it gets. You know it’s like sugary fruit, the more you wait the more it rippen. For the banks, you get fixed % in return plus there are restrictions like premature withdrawals will get XYZ charge backs for breaking the FD and stuff like. It’s definitely not the thing with bitcoin. 

[Marcellin9]

You sound like someone who makes a lot of guesses about a hypothetical situation in which he is not. A passive income of the amount that speaks, what people usually do is spend it instead of depositing it in the bank. There are two exceptions to this:

1) People so rich that passive income far exceeds their level of consumption, so they reinvest it, but never in a shitty bank deposit, unless for a short period of time (to buy when they see an opportunity in RE or shares of a company).
2) People still in the accumulation phase, who in this case reinvest the liability but in the same way as 1). It doesn't make sense to put it in a deposit unless it's short term.

The only reason that you think I am making a lot of guesses about a hypothetical situation is because you are not in that situation, but I am. What you said about the two exceptions proves that. You'll never understand.

 

Your words are good on the one hand, but suppose, for example, if inflation continues at rates such as 10%, then within 5 years you will not have enough capital to cover these expenses, or rather, your capital will be consumed so that it will not be able to generate additional income for you.
So the issue is not the return on investment, but rather the nature of that investment, as its value decreases faster than the interest on it.
Your words will make sense if we are talking about gold ROI.

3% interest rate from deposit is nothing compared to the inflation in most developing nations. Some nations are experiencing up to 30% inflationary rate and the interest rate from bank deposit is just useless. The best option for me is to invest on a product that have a high rate of return. Investing on a product that its cost increases with the inflationary rate might be a good option. I might think of investing in Bitcoin and patiently wait for the bull run. Bitcoin has proved to be a very good investment over the years.

You are right about 3% interest rate from deposit is nothing compared to some nations with insanely 30% infation rate but in my country, the inflation rate is only round 5% so it's still acceptable. There is no right answer since we are living in different places, which is normal.

Whatever percentage interest rate that we aim at in deposit or investment, we should invest in product that rises with inflation time and not policy ban. Product that are decentralised like bitcoin should be the best choice. If you have investment in rentage of house, you are also sure to meet up with the inflation rate. I think it is majorly about how we can take the advantage of inflation and not really to what percentage and guesses we make. We need some reality to survive in highly inflated economy. Don't invest in perishable things.

Agree. Surviving in any situation is the King. Anything else comes secondary.

@OP you already stated that investment in Bitcoin will give a better yield then why bother advising people to deposit their money on banks?  Regular employee cannot avail the 3% interest per annum, they often stay in the bracket of 0.125% to 1% and besides 3% annual interest is somehow impossible in my country.


Take note only Php500,000 (approximately $9000) is insured on the deposited amount so I think it isn't worth the risk of putting huge amount of money on the bank.  If you have a good amount of money, I believe it is better to set up a small business or invest it somewhere else than putting it on the bank. And if you wanted to bank your money why not be your own bank by converting  your cash to Bitcoin and be in self custody.

Investing in Bitcoin is definitely the best choince and I am NOT advising people to deposit but simply discussing a possibility to have reaonable returns with the minimal risks. Because depending on where i live,  most people with $1 million or half a million will deposit in banks and don't worry about money. Discovering more options is essentially helpful to make a better life. The purpose here is always to play safe, not make enormous money instantly. Chasing high yields is not everyone's choice.

[The Sceptical Chymist]

1) People so rich that passive income far exceeds their level of consumption, so they reinvest it, but never in a shitty bank deposit, unless for a short period of time (to buy when they see an opportunity in RE or shares of a company).

Agreed.  The scenario OP envisioned has the hypothetical person earning quite a bit of passive income ("quite a bit" is relative, of course), and if that person was smart they wouldn't just stick that money in an interest-bearing deposit account no matter what the interest rate is.  It's nearly always a better choice to invest money in something that's going to outpace both inflation and whatever a bank can pay you in a savings account or a CD.

I don't trust banks, so I'm a bit biased but keeping some cash in one in order to use when a sweet investment opportunity arises isn't a bad move at all.  In fact, it's smart at a time like this when stocks are trading at extremely high price-to-earnings ratios.  I doubt Warren Buffett would be buying many stocks right now; he'd be waiting until prices came down and then he'd use the cash he had on the sidelines to buy them at a bargain.

[bittraffic]

"you deposit your money to a bank and then you pay them to keep the cash?"

I don't know where I've read that statement but it was sensible when they asked that. But I agree when they say, you better just invest your money somewhere than have an interest of 3% / year. There is a reason why people nowadays don't trust banks also, especially when you can't withdraw them in one transaction.

[adaseb]

I don’t know how it is in all countries but here in North America most banks pay like 1% interest in a savings account. If you want more you need to move those funds to a specialized investment fund and the money might be locked until maturity. You can get 5% that way.

Sure you will keep at pace with inflation but keep in mind that inflation most likely peaked and might even deflate if we hit a recession. And then your 5% will become 0% when they cut rates again. Hence why you are better off buying assets like stocks which can go 50% instead of 5%.

[jrrsparkles]

My previous post "Use your money wisely. Invest or deposit ?" is a very hot topic which receives over 3000 views and more than 240 replies. I read all of your replies and summarize to one common advice: invest in Bitcoin rather than deposit in banks. To be frank, I totally agree and believe this is a great option (of course not put all eggs in one basket). The question is that most people say that 3% of deposit interest rate is nothing compared to inflation rate so deposit would be the last option if they had that amount of money. Well, in real life, I think 3% is quite good enough for deposit only if your other passive income combined is more than your expenses. Please let me explain. Your passive income is $1000 per month, and your salary is $1500/month. Passive income comes from the rental of the house your parents gave you or left you. Salary is from your regular and stable job. Your monthly expenses come to $1000 to $1500. The annual interest from the $100,000 is $3000, which means $250 per month. The rental income plus the interst sums to $1250/month and this money can cover your monthly expenses. In this situation, why don't you deposit that amount of money and feel no worries about your finances ? See, your passive income here can pretty much offset the inflation but that 3% is actually a compound interest rate which brings you more money every year. Plus, your salary of $1500/month, can also be saved in your bank account to earn more money. You know my point here ? I am trying to implement this deposit thing in real situation and find a possibility to benefit from.

Your idea is suitable for someone who is happy with making $3000 for their $100,000 investment and just staying in their own comfort zone but what is the reality we really want 50K returns from 100,000 which is quite unrealistic too but this shows how eager the people are into making more money so they won't go for the least option.

Instead of 3% why don't you consider staking which gives 8% that's big difference right?

[avikz]

My previous post "Use your money wisely. Invest or deposit ?" is a very hot topic which receives over 3000 views and more than 240 replies. I read all of your replies and summarize to one common advice: invest in Bitcoin rather than deposit in banks.

It's a bitcoin related forum so what other advice you were expecting? Obviously people will tell you to invest in bitcoin.

I honestly do not think in a same way! Bitcoin is a super volatile asset class. If you are in your 20s and have some disposable fund in your hand, go ahead and take the risk. But with age, your risk appetite will decrease. Start balancing your investment among many other asset classes to make the most out of it. Bitcoin can make you a millionaire if you invest in right time but it can make you go bankrupt as well, if your timing is not correct. So proceed with caution.

From the security perspective, bank deposits are way more safer than bitcoin!

[tabas]

That's actually a good hypothetical situation that you've made but when it comes to the actual scene, everything varies.

I am trying to implement this deposit thing in real situation and find a possibility to benefit from.

You have to and face any situation that might come to you but having that discipline of depositing or saving will bring you too far, trust me. But you'll also come into many realization that depositing or having your money parked in a savings account, you won't be satisfied with the result of it even if it's a compounding interest. You know who's earning a lot and satisfied with compounding interest? The millionaires to billionares and the wealthier than them. But if even you're not on their shoe, you can extract and really benefit a lot from the discipline that it creates to you.

[indah rezqi]

Investing in Bitcoin is definitely the best choince and I am NOT advising people to deposit but simply discussing a possibility to have reaonable returns with the minimal risks. Because depending on where i live,  most people with $1 million or half a million will deposit in banks and don't worry about money. Discovering more options is essentially helpful to make a better life. The purpose here is always to play safe, not make enormous money instantly. Chasing high yields is not everyone's choice.

I think I understand what you're trying to say, but you'd have a hard time changing our mindset because we tend to be bitcoin users and invest in it.
 
Deposits are for those who tend to dislike the risk of price volatility, but everyone here is a person who accepts the risk of this volatility. You can expect people out there especially those who don't like bitcoin to believe and admit deposits are better and safer, but maybe not here.

I prefer gold over deposits, but bitcoin is a better choice.

[AicecreaME]

I don't see depositing in a bank is a good choice to save money, it's a waste of opportunity in my opinion. Rather than depositing on bank where they get so much interest when someone borrow money from them using the money of their clients while their clients on gets a very small profits annually or whatever. Investing is much wiser, risky but it's worth the try rather than not going out of your comfort zone.

[Iranus]

My previous post "Use your money wisely. Invest or deposit ?" is a very hot topic which receives over 3000 views and more than 240 replies. I read all of your replies and summarize to one common advice: invest in Bitcoin rather than deposit in banks.

It's a bitcoin related forum so what other advice you were expecting? Obviously people will tell you to invest in bitcoin.

I honestly do not think in a same way! Bitcoin is a super volatile asset class. If you are in your 20s and have some disposable fund in your hand, go ahead and take the risk. But with age, your risk appetite will decrease. Start balancing your investment among many other asset classes to make the most out of it. Bitcoin can make you a millionaire if you invest in right time but it can make you go bankrupt as well, if your timing is not correct. So proceed with caution.

From the security perspective, bank deposits are way more safer than bitcoin!

The fairest comment I have ever seen, people keep saying that it is better to invest in bitcoin instead of depositing, but no one here can say with 100% certainty that bitcoin will make a profit for them. Despite being 13 years old, bitcoin is still a super risky speculative asset, no one can predict what will happen to bitcoin in the future. All of our predictions are optimistic because we are investing in BTC, but that doesn't mean they will come true. I wonder, people who invest in bitcoin for $69k, how are they fighting inflation?

To be fair, depositing money or investing has its advantages and disadvantages, it just needs to be balanced most reasonably.

[ilovealtcoins]

I don't see depositing in a bank is a good choice to save money, it's a waste of opportunity in my opinion. Rather than depositing on bank where they get so much interest when someone borrow money from them using the money of their clients while their clients on gets a very small profits annually or whatever. Investing is much wiser, risky but it's worth the try rather than not going out of your comfort zone.

What you say is only partially correct. Risky investment is usually for people with little money because you need more money for living expenses, but while the rich, they will have huge savings in the bank and a few other investments. Investing all the money you have is not wise, it is only suitable for those who do not have too much money. Because there is no guarantee that the investment will definitely generate a return.

[stompix]

Your passive income is $1000 per month, and your salary is $1500/month. Passive income comes from the rental of the house your parents gave you or left you. Salary is from your regular and stable job. Your monthly expenses come to $1000 to $1500. The annual interest from the $100,000 is $3000, which means $250 per month. The rental income plus the interst sums to $1250/month and this money can cover your monthly expenses.

So for this to work, you need another house to rent, and 100k in the bank, which can get you 1000$ plus 250$ a month.
I find the numbers a bit weird but still, there is one question, if you believe in that compound interest in the bank, why don't you sell the house and put that money in the bank? If you're going to say that renting is safer, why not buy another one-bedroom flat with the money in the bank that for sure you could rent for more than 250$ a month?

See, your passive income here can pretty much offset the inflation but that 3% is actually a compound interest rate which brings you more money every year.

The problem is that you have no guarantee that interest alone can offset inflation, right now with annual inflation of 10% you would need 3 years of interest and zero inflation for the next two years, so, it doesn't really work that easily! Besides, if keeping money in your bank would always generate enough income to offset inflation by now nobody would have a problem with money, no need to wait 1000 years like in Futurama!

You are right about 3% interest rate from deposit is nothing compared to some nations with insanely 30% infation rate but in my country, the inflation rate is only round 5% so it's still acceptable.

And with 5% being bigger than 3%, you're not having a steady passive income, you're losing money as inflation bites on your capital!