With 500 million VND, should I put it in a savings account or buy stocks?

Người Lao Động•27/06/2023

In just three months, the State Bank of Vietnam has reduced the policy interest rate four times, bringing down both deposit and lending interest rates. In this context, many people are wondering whether they should deposit 500 million VND in a savings account with a term of 6 months to 1 year or invest in the stock market, as the return on investment for this channel has recently been quite high, and the market is much more active than before.

Mr. Nguyen Nhat Khanh, Head of Investment Consulting Department, Head Office Branch - Mirae Asset Securities Company, replied: Regarding savings deposits, interest rates at commercial banks are currently falling quite rapidly. As of June 19th, there have been four reductions in the policy interest rate. For a 6-month term, the maximum interest rate a depositor can receive is 5% per year, which is quite low compared to other channels.

For a 1-year term, the maximum interest rate a depositor can receive is only slightly over 7% at most banks, although a few smaller banks with lower competitiveness and brand recognition may offer rates as low as 8%.

Có 500 triệu đồng, nên gửi tiết kiệm hay mua cổ phiếu? - Ảnh 1.

Investing in stocks is a long journey, and investors need to equip themselves with basic knowledge...

Regarding the stock market, this type of investment is quite different from other channels, so comparing it to savings accounts is rather inappropriate.

Firstly, this type of investment carries a high level of risk, with a significant potential for capital loss during periods of high market volatility, such as the second half of 2022. Therefore, it is not suitable for the majority of people, especially those who are older, nearing retirement, or already retired and need a stable cash flow with a low risk tolerance.

Secondly, this channel generates very low and inconsistent cash flow (from dividends). Investing in this channel in Vietnam is primarily for profit from price differences; many people participate because they want to get rich quickly.

Given the situation, if you have never participated in the market before and want to invest the entire 500 million VND from your maturing savings account into the stock market, you must consider it very carefully. Investing in stocks is a long journey, requiring thorough research and a systematic approach, from understanding the impact of the macroeconomic environment and the industry to selecting companies. Only then can you find good stocks – these steps are by no means simple.

Regardless of the investment approach, it's essential to acquire knowledge and skills; simply "buy and sell" based on stock tickers and the beliefs of the majority is not enough. When the market experiences significant volatility, small, uninformed investors will be the hardest hit.

In the second half of 2023, the influx of funds from low-interest rate channels, both deposits and loans, into the stock market is likely to boost market activity and liquidity, thereby giving stocks more impetus to increase in price and creating more opportunities for profit. However, these are only the immediate effects. Those with idle money who are truly interested in this channel should only allocate a small portion to start, and only increase their holdings when they are truly comfortable. Remember, never increase your asset allocation to this channel too quickly for short-term profits; it's very easy to fall into a "trap"—that is, get bogged down in losses after sharp market declines, and then develop a negative view of this investment channel.

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