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Situation sketch: I'm nearly 30 years old, single, still living with my parents in Belgium and disabled (autism in case it's relevant). I have a job where I earn about 1750 EUR after taxes monthly. I pay a monthly stipend of about 300 EUR to my parents, and in return they let me live with them, pay for electricity, internet and Netflix, and do my laundry and cook for me. I have a couple of smaller payments every month related to video games and my phone bills that together amount to somewhere around 50 EUR per month.

My parents are nearly retired, and for about a year we've been discussing the possibility of me and my brother's family moving in together in what's called a "Kangoeroewoning" in Belgium sometime in the next 5 years or so. The closest English term is "intergenerational home", but in this case it would be the same generation. So this question should be viewed from the perspective of someone who is saving up for a large purchase in about 5 years.

My situation is as follows: I have a savings account with a Belgian bank (Belfius in case it's relevant) with a little over 90,000 EUR. My parents have voiced concerns about having more than 100,000 EUR at the same bank because EU guidelines only protect that much money per bank per person, and Belfius already had to be bailed out once (and nationalized) a decade ago during the global financial crisis. With my current income situation I'm probably going to reach that number somewhere over the next couple months.

I'm now trying to figure out what my best options are.

  • Belgian interest rates on savings accounts are generally low, usually only being 0.11%. The best rating I can find with a bank that seems trustworthy is Rabobank.be, at 0.35%. This isn't really that much either, but it has the advantage that it's a different warranty fund for those EU guidelines compared to Belfius.
  • There are some short to middle-term "safe" investments that have a guaranteed return rate and are also covered by a warranty fund, but these generally also have a quite low ROI.
  • There are some more risky funds that have return rates that are slightly above average inflation rate, but while these have a guaranteed return rate, they might not always be covered by the warranty fund.
  • Finally, there is the stock exchange market, which can provide absurdly high gains, but that has a high risk, has no guaranteed return rate and isn't covered by any warranty fund. There's also the problem of stocks currently being highly volatile due to COVID-19 and other local, regional and global events.

What I'm trying to achieve is on one hand to spread risks so I don't end up losing all of my money due to sociopolitical turmoil, and if possible try to get my money to do something else than just sitting there and depreciating in value due to inflation.

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What kind of stock index funds are available to you in Belgium? If S&P 500 index funds are available in Belgium, consider opening a brokerage account and investing a fixed amount at the beginning of every month in such an index fund. Over a period of time there are very good chances that you will make more than 0.35%. In fact, you will most likely beat inflation and see a real growth in your savings if you keep doing this for years.

The fixed investment per month will help you Euro/dollar-cost average. That is, when the market is low you will be able to buy more shares/units of the index fund into which you are investing, and when the market is high, fewer shares thus ensuring that your average cost of purchase is reasonably low. Since this is passive investing, you will save time in researching individual stocks and so will avoid making costly mistakes. Index funds are well-diversified and so individual stock risk has been minimized. All you are exposed to is market risk. For a beginner, this way of investing is a good start.

Just start what is called an systematic investment plan which automatically debits your account for, say 500 Euro, at the beginning of every month and buys units/shares in an index fund. This link will give you some idea (no guarantee) of what performance to expect a few years from now based on past performance of an index fund

Note that regardless of history, in the stock market there are no guarantees that you will get a positive return in a given period of time. But in general, trees grow and so do businesses over the long run. In other words, there tends to be a good amount of upward drift in the stock market over the long run.

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    We just went through a 30% drop in value in indexes over the course of about a month. While there has been some recovery, it's still down about 10% from the peak. Given that the OP has the money earmarked for a major purchase within 5 years, I would say this is far too risky an option to consider. – Eric Jun 3 '20 at 14:08
  • It's subjective.. If the monthly installment is not too high, he is likely to do better than with a savings account. If he continues to keep his money in the savings account that he has, inflation will continually erode its purchasing power. He is already earning a negative real rate of return. – user2371765 Jun 3 '20 at 14:46
  • Also, I recommended SPY- not any European index fund. – user2371765 Jun 3 '20 at 14:52
  • Normally, the central bank acts to ensure that the real rate of return is positive. But, since they have not, they want more investment in the market. If they don't get it, they might consider reducing the nominal rate still further. – user2371765 Jun 3 '20 at 14:55
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    @Eric The OP has a five year horizon. And I recommended a systematic investment plan - not a lump-sum investment. There will always be risk in investing in the market- the key is to diversify it. Also, the OP wrote "What I'm trying to achieve is on one hand to spread risks so I don't end up losing all of my money due to sociopolitical turmoil, and if possible try to get my money to do something else than just sitting there and depreciating in value due to inflation." Spreading/diversifying risks is achieved by indexation and equity returns generally outpace inflation. – user2371765 Jun 3 '20 at 17:45

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