Yesterday an interesting article appeared in the Belgian press.
Saving Belgian also guilty on keeping interest rates low…
According to a study of Eric Dor, a professor of economics, is the ECB low interest rate policy not the only reason for low interest rates on savings accounts. His reasoning is that the Belgians just keep on putting more money on their savings account. But the more money they put on that savings account, the more money they lose….
What worries the professor the most is the collective behavior of the Belgians. Because the Belgians keep on saving
money as they see no alternative, the interest rates won’t go up. The banks don’t mind as they see the money coming in and piling up. With an inflation rate of 2,65% in January 2017, the real return on investment for savings accounts is -2,54%. That means that the Belgian saving population lost 6,5 billion in buying power…how stupid they can be…
What can be the reason for this Belgian (stupid) behavior?
We see mainly two reasons that can have caused this behavior.
Reason 1 : The speculation tax
In 2016 the governmental party CD&V pushed a stupid gain tax through for people investing in the stock market. This has scared off a lot of small investors and killed a lot of behavioral change. You can read more about on my blog post The speculation tax is dead – What can you learn from this?
The same party is now lobbying for a gain tax on stock transactions. This is scaring people away from the stock market as the Belgian government keeps on inventing new taxes instead of cutting down expenses. They increased the dividend tax with another 5%. Read all about it in our blog post – Who is stealing our money ?
Reason 2 : Financial literacy
Another reason for not investing in the stock market is the memory of disasters with stock listed companies. There were a few major ones in the Belgian history…Lernout&Hauspie, Fortis bank, Dexia,… It’s all about the perception of risk. Who invested in the stock market, had an average return of 7% per year. But of course your capital could fluctuate heavily. We have seen that in our portfolio, but we kept on investing consistently according to our Portfolio strategy.
In Holland investors have made the mental click in their head that investing in the stock market is a way to grow your money. There are much more courses and exhibitions about how to invest in the stock market. Amongst all European people, the Dutch and the Germans are most financially literate and they actively search for ways to grow their money. The Belgians keep on putting money on their savings accounts while losing more money…how stupid that can be !
Going forward
Reading all this in the press and hearing this also amongst friends and family, we can do only one thing. Show by example our systematic approach to the stock market and building our dividend cash factory. Show them how we grow our money for our kids and for our family. And communicate, teach, share knowledge….
Secondly making our financial blog more known amongst investors. It is important to share knowledge and create awareness that you can do things differently. Invest in yourself, in your financial education and learn how to put your money at work.
Last but not least we want to emphasize that putting money on a saving account is fine for layer 1, your Emergency Fund of your Financial pyramid. But apply always strategies to grow your money with a cash flow return higher than the inflation.
We will end with a quote of Sven Sterckx, the Chairman of the Belgian investors organization VFB :
“Investing your money is an economic necessity if you want to sustain your living standards at your pension.”
We totally agree with that statement. Don’t be one of those stupid Belgians….
In coming two weeks you can read the passive income reports of my kids portfolio and my own personal portfolio.
Source : Moneytalk
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