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I came to this site because I want to see what are my options with my current situation. I should start by saying that I am from Serbia and I possess no other citizenship. I have recently finished college and started working in my field (I even got a permanent employment).

Money has never been a problem for me and my family since my father is a successful small business owner. His practice up until a few years ago was to put some money on the side and set up a savings account for one year. The interest rate was about 4% for Euros. But the current savings rate is about 1%, which he thinks is not worth the hassle anymore.

Long story short, he currently has about 100k Euros in a vault! Because he considers it retarded to put that money and gain only 1k euros after a full year.

To me this is wasting a potential that that money could do but I do agree that it is very dumb to get only one thousand euros after a year. My question is, is there anything else we can do with that much money?

I read all these things about the US and Britain having savings accounts, 401k accounts and matched employer pension funds, and some other stuff I really don't know nor do I understand but I am pretty sure we don't have such benefits in Serbia. I also heard about stock investments but I don't know how risky that is and I don't really believe in the stability of Serbian firms (I don't know if we even have a stock-market here or if I can invest in foreign ones).

I should also stress that we are in no debt what so ever and that money is not tight for us. I just want to know if there is a better way to save more money than a yearly 1% regardless if it is long term or not?

  • rental property – Knuckle-Dragger May 17 '15 at 20:08
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    Consider getting an index fund stock, or hire a trustworthy financial adviser that may make that money work for you. – user427 May 17 '15 at 20:48
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    If you aren't even getting interest, you are losing money to inflation. Start by putting it in an interest-bearing account! Would you really throw away a "free" 1k Euros??? After that... You need someone who knows what's accessible from Serbia, which I don't, but the "no-brainer" answer in the US market would be index funds, mostly bond index with progressively smaller amounts in large company stock index, small company stock index, and perhaps a small amount in REITs and an iternational stock index. Almost anything, if you keep it simple, will be better than the vault! – keshlam May 17 '15 at 22:01
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    Real estate isn't passive income unless you give a good chunk of the income to someone else to manage the property for you. RE is a valid business to be in, but it's a business rather than an investment per se. And depending on local market, it may or may not be the best thing to do with the money. – keshlam May 18 '15 at 2:43
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    still much easier to do when you don't have a pesky mortgage payment. – Knuckle-Dragger May 18 '15 at 22:27
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As stated in the comments, Index Funds are the way to go. Stocks have the best return on investment, if you can stomach the volatility, and the diversification index funds bring you is unbeatable, while keeping costs low.

You don't need an Individual Savings Account (UK), 401(k) (US) or similar, though they would be helpful to boost investment performance. These are tax advantaged accounts; without them you will have to pay taxes on your investment gains.

However, there's still a lot to gain from investing, specially if the alternative is to place them in the vault or similar. Bear in mind that inflation makes your money shrink in real terms. Even a small interest is better than no interest.


Find the best broker available

By best I mean that is safe (regulated by the financial authorities, so your money is safe and insured up to a certain amount) and has reasonable fees (keeping costs low is a must in any scenario).

Choose the best index fund/s available

The two main concerns when designing your portfolio are diversification and low TER (Total Expense Ratio). As when we chose broker, our concern is to be as safe as we possibly can (diversification helps with this) and to keep costs at the bare minimum.

Some issues might restrict your election or make others seem better. Depending on the country you live and the one of the fund, you might have to pay more taxes on gains/dividends.

e.g. The US keeps some of them if your country doesn't have a special treaty with them. Look for W-8Ben and tax withholding for more information.

Vanguard and Blackrock offer nice index funds. Morningstar might be a good place for gathering information. Don't trust blindly the 'rating'. Some values are 'not rated' and kick ass the 4 star ones. Again: seek low TER.


Hire a financial adviser (maybe)

Not a big fan of this point, but I'm bound to mention it. It can be actually helpful for sorting out tax related issues, which might decide the kind of index fund you pick, and if you find this topic somewhat daunting. You start with a good chunk of money, so it might make even more sense in your scenario to hire someone knowledgeable and trustworthy.

I hope this helps to get you started. Best of luck.

  • Index funds are a decent idea, but is it possible to invest in US index funds as from within Serbia? If not this is a moot point. – Esoteric Screen Name May 18 '15 at 10:43
  • It will all depend on which markets are available through the broker. Another issue is if there are tax-related hindrances, but that depends on the bilateral relations between the countries and if there are forms to claim withheld taxes (like the W-8Ben in the case of the US). – Calculus Knight May 18 '15 at 11:10
  • I have no idea where I can check this, who is the authority I should check these things with? I seriously doubt a bank teller could tell me this. – ZaBaciti May 18 '15 at 12:12
  • To be honest, the details elude me. For choosing my broker I looked it up in forums and independent financial blogs. However, you might find difficult to double check if you can't find those. An independent financial advisor might help you answer these detailed questions. I wouldn't ever rely on a bank for this matter. I wish I could help you more with the specifics. – Calculus Knight May 18 '15 at 12:44
  • And regarding the downvote; isn't supposed to be accompanied by a comment in order to improve the answer? – Calculus Knight May 18 '15 at 12:45

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