If I have 70 million VND left over each month, should I put it in a savings account or buy gold?

If you have a surplus of 50-70 million VND each month, experts suggest considering certificates of deposit instead of savings accounts, and allocating a portion to gold.

I am a 29-year-old male, married to a woman of the same age. Currently, I work for a company and my wife manages a small business. Each month, after deducting all expenses, my wife and I have a surplus of 50-70 million VND.

Given the current economic situation, I'd like expert advice on where to invest my surplus funds to avoid inflation. I'm considering two options: depositing in a bank and buying gold. With bank deposits, I find the interest rates low and worry they won't cover inflation. With gold, I see a significant price difference between domestic and international markets, and the rising price risks buying at the peak.

I don't want to invest in other channels like stocks during this volatile period because I've had experience and feel I'm not capable of making money from the market. I currently lack the capital for real estate, and I already own an apartment and a few smaller properties, so I'm wary of cash flow risks at this time.

Huy

A shop employee in Ho Chi Minh City is displaying gold on the day of the God of Wealth festival, morning of January 31st. Photo: Thanh Tung.

Consultant:

From your question, I can see that you have done some research and have personal experience with various investment channels. Therefore, I will provide an overview of the two channels you are interested in: bank deposits and gold, and also send you some information related to other investment channels.

Before determining the appropriate investment channel for your monthly surplus of 50-70 million VND, I assume you already have a financial plan and are fully capable of using all of your surplus for investment.

Regarding bank deposits and gold, both channels offer advantages in terms of safety, protection, and capital appreciation. As you noted, with current deposit interest rates around 5-6% per year, the potential for profit from bank savings may be limited due to inflation; however, you could consider additional products such as certificates of deposit at some banks.

A certificate of deposit is a type of valuable security issued by banks to raise capital from organizations or individuals. It's like a savings passbook that you deposit into a bank. The money you deposit is held for a specific period, during which the bank pays periodic interest on your deposit. Interest rates are usually higher than those of regular savings accounts, but you are not allowed to withdraw money before the contract expires. If you withdraw early, you will be charged a fee depending on the terms and agreement between you and the bank. Some banks allow you to "transfer" this certificate and receive daily interest. However, whether someone will accept the transfer depends heavily on whether the market conditions are attractive enough.

The advantage of this product is its higher interest rate compared to regular savings accounts. The disadvantages are the long term (medium and long term), low liquidity, lack of flexibility, and the fact that you won't be able to take advantage of attractive savings interest rate periods like those at the beginning of this year.

Regarding gold, it serves as a safe-haven investment, a hedge against inflation and geopolitical instability. Domestic gold prices remain on an upward trend, fluctuating around 70 million VND per tael despite a downward trend in global prices. Currently, the price difference between the two markets is over 10 million VND per tael.

Experts explain the sharp increase in domestic precious metal prices as being due to the long-standing lack of imports and resulting supply shortages. Additionally, the rising US dollar is also contributing to the increase in domestic gold prices. Furthermore, the rise in domestic gold prices is also influenced by sentiment, the current interest rate situation, and geopolitical instability, such as concerns surrounding the Israel-Hamas conflict.

I believe this remains a stable and profitable investment channel. According to statistics from Dragon Capital, from 2000 to 2021, the average return on this channel was 9% per year. However, with the current high price of gold in Vietnam, you should consider allocating only a portion of your monthly surplus to this channel to optimize your overall portfolio return and minimize systemic risk.

Furthermore, due to a lack of information about your asset portfolio, I cannot assess the rationality and effectiveness of your real estate portfolio. However, real estate remains a potentially stable and relatively high-yielding investment in the long term. With your current stable and strong surplus cash flow, you may consider using financial leverage to purchase houses and land. Leverage is appropriate when the interest rate you borrow is lower than the potential growth of the purchased property.

For example, when you borrow from a bank at an average interest rate of 9% per year, while the growth of residential real estate in major cities is typically around 11-12% per year, you are using "leverage" to increase your family's assets. Conversely, when the loan interest rate is higher than the potential growth of the real estate, it means you shouldn't use leverage. Given that loan interest rates are currently at an attractive level and are expected to remain stable, using financial leverage to accumulate assets is quite reasonable and worth considering.

Nguyen Thi Thuy Chi
Personal Finance Planning Expert at
FIDT Investment Consulting and Asset Management Company

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