Michael Schacht, 70 years old, is a typical German saver. Risk-averse, the clothing-shop owner kept the equivalent of $300,000 in a local bank in a small town near Hamburg.
Then, earlier this year, Mr. Schacht’s bank told him it wanted to charge him a negative 0.5% interest rate to hold his money.
Furious, Mr. Schacht did something he never considered: He put it all in the market. His portfolio includes investments in stocks and corporate bonds from Europe and elsewhere through funds, plus gold and silver.
“I don’t want to make lots of money, I just want a low-risk investment that provides a reasonable return on capital, like 2%, 4%,” Mr. Schacht said. “That has always been realistic in the past.”
This is an example of how investors are being forced to speculate. Negative interest rates are an obvious tax on savers so they have no choice but to buy riskier assets. It is a choice between guaranteed modest losses or potential gains with the added scope for bigger losses. This is particularly acute in places like Germany where retail investors don’t generally invest in the stock market.Click HERE to subscribe to Fuller Treacy Money Back to top