Government bonds are an investor loan to a government institution or government entity. It earns an interest income (bond coupon) for a defined period, usually from one to 30 years. Coupons are typically paid once or twice a year. Because of such a stable cash flow, bonds are also known as fixed-income stocks. Government bonds are virtually risk-free, backed by complete government trust and credit.
The disadvantages of this type of investment – precisely because of their security – are not large profits as with other types of investment. If your investment portfolio consists of 100% government bonds (as opposed to a mix of stocks and bonds), you will find achieving long-term or retirement goals significantly more challenging.
Best investment for: conservative, risk-averse investors. Fixed income and minor instability make them a favourite, with investors close to retirement or already retired.
Where to buy government bonds: You can purchase bonds by placing an order with a broker or authorized bank.
The share represents a share in the ownership of the company. Shares offer the highest potential return on your investment while exposing your money to the highest level of risk. These warning words are not intended to deter you from investing in stocks. On the contrary, they aim to direct you to the diversification offered by buying different shares through investment funds rather than buying individual shares.
The best investment for: investors with a well-diversified portfolio who are willing to take a little extra risk and trade stocks independently. To reduce the risk of investing in individual shares, a good rule of thumb for investing in shares is to limit the investment in each individual share to a maximum of 10% of the total portfolio.
Where to buy stocks: the easiest and cheapest way is through an online broker.
An investment fund is a form of joint venture that draws on funds raised from many investors. By investing in the fund, the investor becomes the owner of the investment units. Shares, bonds and other financial assets are purchased from the total assets of the fund.
Investment funds offer investors a cheaper way to diversify, i.e., invest money in several different investments to avoid any individual loss per investment.
Best investment for: investors who want to achieve higher returns without the need to trade stocks independently.
Where to buy investment units: investment units of funds are available for purchase from investment fund management companies through authorized distributors.
Mixed life insurance is a combination of insurance and long-term savings. In developed countries, on average, almost every adult citizen owns at least one life insurance product.
Considering that the structure of investments of insurance companies in Serbia is dominated by securities issued by the Republic of Serbia with over 90% stake, mixed life insurance is one of the safest forms of long-term savings.
The best investment for: investors who want to invest in safe assets, who do not want to take the concept of risk into account, but want to ensure a safer future for their loved ones.
Where to buy life insurance: through authorized agents and insurance brokers or directly at the insurance company.
The unit-linked model is an ideal combination of life insurance and savings through investing in investment funds.
In developed countries, these products dominate the life insurance market. Although unit-linked insurance has only recently been introduced in Serbia, it is now used as often as mixed life insurance, which has been offered in this area since the mid-1990s. Due to its characteristics, and primarily its active return on invested funds, it is increasingly conquering the market in our country.
Like mixed life insurance, unit-linked products require the policyholder to make regular premium payments, part of which covers the risk of death (guaranteed sum insured). In contrast, the remaining part is converted into investment units of funds. This is the advantage of this product – investing the savings part of the premium in investment funds means a higher profit.
The best investment for: investors who want to ensure a safer future for their loved ones and, at the same time, achieve a higher return on their money than with traditional mixed life insurance.
Where to buy unit-linked life insurance: through authorized agents and intermediaries or Wiener Städtische a.d.o. Beograd.
A member of a private pension fund can be any person under the age of 70, regardless of whether they are employed or not. Most of the users of private pension funds in Serbia are employees for whose benefit employers pay funds. The state has incentivized employers, so payments up to a certain amount per employee are exempt from taxes and mandatory contributions. The amount to be paid for a fund member is voluntary, as are the payment plan dynamics.
In Serbia, the funds can be withdrawn at the age of 58 at the earliest. 30% of funds can be withdrawn from the member's account, and the rest can be programmed payments.
Best investment for: employers and trade unions who want to provide their employees and members with additional income in old age.
Where to buy a pension fund: in one of the registered funds.
If you do not invest in stocks, bonds, funds or life insurance, you can opt for alternative investments such as cryptocurrencies, gold, silver, oil, antiques, etc.
Alternative ways of investing became popular in the first decade of the 21st century when both shareholders and bondholders witnessed their savings lose significantly in value. In contrast, the price of gold, for example, jumped considerably in 2011 and decreased in August 2020. However, this is an exception in the alternative investment market, as they are full of oscillations. It should be noted that legal regulations regarding this type of investment have yet to be precisely defined in our country.
Best investment for: investors who want to stand out from traditional investments and to avoid price changes in the stock and bond markets.
Where to buy alternative investments: some online brokers and online platforms offer access to alternative investments, but most of these investments can only be made through private asset management companies.
Traditional real estate investing involves buying and selling a property to make a profit or owning a property and collecting rent as a form of more or less fixed income. Several other ways of investing in real estate on the world market have not yet been developed in Serbia.
Best investment for: investors who already have a healthy investment portfolio and are looking for further diversification or want to take more risk for higher returns. Investments in real estate are very illiquid; therefore, investors should not invest the money they may need in the short term.
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