These exchange-traded funds (ETFs) now yield higher returns than day money and fixed-income investments.

These exchange-traded funds (ETFs) now yield higher returns than day money and fixed-income investments.

Park Your Cash in ETFs for Better Interest Rates

In today's low-interest-rate climate, returns on savings and time deposits are suffering. Banks, anticipating further rate cuts, are offering less attractive deals to customers. But fret not, investment-savvy folks! ETFs can be your ticket to higher interest rates.

Cash-Like ETFs - The Smart Alternative

Money market ETFs are attracting attention as an alternative to traditional savings accounts. These bad boys track the ECB's deposit rate through investments in short-term government bonds or swap transactions. This approach minimizes interest rate risk, provides low volatility (except in exceptional circumstances), and grants you access to your cash daily.

Here's a few money market ETFs to consider:

• Xtrackers EUR Overnight Rate Swap UCITS ETF (WKN: DBX0AN)
• Deka Deutsche Boerse EUROGOV Germany Money Market UCITS ETF (WKN: ETFL22)
• Invesco EuroMTS Cash 3 Months UCITS ETF (WKN: A0RAC9)

Prefer a regular savings account? Check out the BÖRSE ONLINE savings account comparison instead.

Also read: Become a MILLIONAIRE in 25 years, Simple ETF strategy, and With stocks and the MSCI World.

Bond ETFs - Long-Term Cash Parking

For longer investment horizons, consider bond ETFs with a fixed term. These pay out capital and interest at the end of their term. You can choose between government or corporate bonds. However, keep in mind that these investments can be volatile during their term.

Here are some choices:

• iShares iBonds Dec 2027 Term € Corp UCITS ETF (WKN: A3EGGM)
• Amundi Fixed Maturity 2027 German Bund Government Bond UCITS ETF (WKN: ETF169)
• Xtrackers II Target Maturity Sept 2027 EUR Corporate Bond UCITS ETF (WKN: DBX0VA)

Interested in a time deposit? Check out the BÖRSE ONLINE time deposit comparison instead.

The Lowdown on ETFs

While ETFs don't inherently offer higher interest rates than savings accounts or time deposits, they can provide alternative investment strategies that perform better over time due to their diversified nature and exposure to various financial instruments. This can be particularly appealing in low-interest-rate environments like today.

1. Diversification and Flexibility: ETFs enable investors to spread their investments across various asset classes, sectors, and geographic regions. This diversification can lead to potentially higher returns compared to traditional savings accounts or time deposits.
2. Unique Investment Opportunities: Some ETFs, such as overnight ETFs, provide exposure to short-term interest rates determined by central banks. While these rates might not be higher than those offered by savings accounts or time deposits, they offer a unique liquid investment opportunity that tracks short-term market conditions.
3. Risk and Return Trade-off: ETFs may involve more risk than savings accounts or time deposits as they are subject to market fluctuations. However, this risk can translate into higher potential returns over the long term, provided the ETF invests in assets with growth potential.
4. Low Interest Rate Environment: In low-interest-rate environments, traditional savings accounts and time deposits may struggle to keep pace with inflation, or even fall short. ETFs, especially those focused on equities or other growth-oriented assets, can offer a way to potentially outperform inflation and earn higher returns over time.

Personal-finance enthusiasts might find investing in money market ETFs a wise alternative to traditional savings accounts, as they can offer Cash-like liquidity while providing higher interest rates due to investments in short-term government bonds or swap transactions.

For those looking to park cash for longer terms, bond ETFs with a fixed term could be an option, offering the potential for capital and interest payouts at the end of their term, despite the volatility during their term.

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