If you are an amateur investor or have a low risk tolerance, this might interest you. Until recently, traditional savings and investment products, such as savings accounts and deposits, were all there was. But now, interest-bearing accounts and savings portfolios pose interesting alternatives. Let’s dive into what they entail.
First of all, it’s essential to clarify that saving is not the same as investing, although both can be seen as two sides of the same coin. Saving is refraining from spending, and typically, this saved money is kept somewhere, like the bank, not only to preserve it but also to earn interest. Therefore, in this article, we will discuss savings-investment products.
What are interest-bearing accounts?
We all have some money in the bank. Whether it’s a significant amount or less than we’d like, almost everyone has a good portion of their money in the bank. Generally, the bank remunerates this money, as deposits allow the institution to lend money to others… at a higher interest rate than what they pay us. Most commonly, this money is in a savings account, which offers a modest interest for keeping our money there.
However, for day-to-day transactions—expenses, transfers, direct debits—it’s usually necessary to have a different account. This is the current account, which also offers a lot of liquidity—access to our money whenever we want—but generally does not offer any remuneration. What if there were another possibility that combined the best of both?
That is, in theory, what interest-bearing accounts offer. They are accounts that are a mix between the savings account and the current account since they allow normal operations and offer a return to the account holder. What’s the catch? The conditions. Interest-bearing accounts usually offer attractive interest rates at the beginning—during the first three, four, five, or six months—and lower rates afterward. Additionally, it’s common to require a minimum or maximum amount of money to open it, or even to contract associated products—such as a card—or to have the salary domiciled, etc.
What are savings portfolios?
Savings portfolios are, in a way, a triumph of marketing: they combine the savings suggested by traditional accounts with the profitability offered by investments. They are not accounts, strictly speaking, but rather investment portfolios. The difference is that these investments have very low risk… and a return higher than that of interest-bearing and savings accounts. How do they achieve this?
Savings portfolios are portfolios of investment funds, so they offer good liquidity. Furthermore, they achieve returns usually higher than other savings-investment products because they invest in money market and short-term fixed-income funds. Although they are low-risk assets, they have more risk than leaving the money in the bank, and, for that reason, they offer higher interest.
Conclusion: interest-bearing accounts or savings portfolios?
We have two solutions for savings that offer competitive returns with low risk. Interest-bearing accounts offer liquidity and a higher return than savings accounts, but it is usually conditioned by time, the amount of money, or even associated products. The best ones have no fees and, sometimes, no ties either.
On the other hand, savings portfolios are investment products. Their return is generally higher than that of interest-bearing accounts. But attention must be paid to the fees: since they operate with funds, it is necessary to check the management, subscription, and custody fees that apply, as well as the TER of the funds (the expenses of each fund). Also, as with all funds, the return generated by the savings portfolio is not taxed until the redemption is made: that is, when we want to transfer part or all of the funds to our bank account.
Therefore, we have two attractive savings-investment products for conservative investors or those who want to squeeze a little more out of their savings without taking on risks. If you are looking for returns that exceed double digits with very limited risks, you can always take a look at real estate crowdfunding…
Frequently Asked Questions (FAQ)
When is it worth switching from an interest-bearing account to a savings portfolio?
When you’ve already covered your 3–6 month emergency fund, your goal is more than 12–18 months away, and the net annual return (APR/AER) on your account—after the promotional period and taxes—is below expected inflation or below the net return you expect from a conservative portfolio. Also, when you hit the account’s maximum interest-bearing balance, the promotion ends, or constantly switching banks leaves you with days earning no interest and drags down overall returns.
What risks exist in a savings portfolio that aren’t obvious at first glance?
Interest-rate sensitivity due to the portfolio’s duration, credit risk and concentration risk by issuer or sector, operational liquidity risk (redemptions typically take 1–3 business days) and potential adjustments to the net asset value (NAV), implicit costs in addition to the TER—such as spreads and transaction costs—currency exposure if it isn’t hedged, counterparty risk in transactions involving derivatives and repos, and mandate drift versus its benchmark. To mitigate this, request the fact sheet showing duration, credit rating, top ten holdings, estimated total cost, and stress-test scenarios.
What common mistakes do I see when choosing between the two options?
- Staying in the account out of inertia after the promo ends, or ignoring caps on the interest-bearing balance.
- Comparing apples to oranges: portfolios vs. fixed-term deposits or long-duration indices.
- Looking only at past returns and not volatility/duration or drawdowns.
- Not accounting for taxes/inflation: evaluate in net and real terms.
- All-in / all-out: moving everything at once with no plan or periodic rebalancing.
- Neglecting the emergency fund: investing cash you might need within weeks.
- Underestimating frictions: days with no interest when “churning” promos.
- Forgetting costs: TER + implicit costs + platform fees.
- Not documenting objectives (no personal “investment policy”) or automating contributions.
