Financial Instruments
Translated from Russian with the help of AI. Original: Russian version
Basic investment advice: deposits of up to KZT 20 million are state-guaranteed, dollar savings are better held in bonds, and real estate is not attractive right now.
I am often asked where to invest one's own money. It is a very complex subject, involving risk appetite, portfolio management and much else. Traditionally, our population is inclined toward dubious financial instruments built on trust in individuals and salespeople rather than in professionals. As a result, many people end up in stories involving financial pyramids, cryptocurrencies, questionable stocks and the like. Nevertheless, I would like to set out some basic points that many could use as small insights when making decisions.
Do not chase quick returns: by the law of large numbers, you will lose.
In periods of high inflation, central banks set rates above inflation expectations, so debt instruments are always preferable in times of high rates and crises.
A deposit is also a financial instrument. In Kazakhstan, amounts of up to KZT 20 million are guaranteed by the state, so up to KZT 20 million you can place your funds in any bank (a member of the Kazakhstan Deposit Insurance Fund, KDIF) at the highest rate.
A deposit certificate and a deposit are different financial instruments: certificates are not guaranteed by the state.
In Kazakhstan, dollar deposits are non-market, since the state caps their rates. In the long run, with equal risk on the issuer, the difference in market rates will equal the depreciation of the currency, but this works only over long horizons (5 years and more). Since dollar deposit rates in Kazakhstan are capped, it is better to hold deposits in tenge. If you still want to hold dollars, go to brokers and keep your money in dollar-denominated bonds.
Look at the risks. If you hold up to KZT 20 million, your risk is sovereign (BBB-); if you hold more than KZT 20 million, look at the bank's rating. If you buy bonds, also look at the bonds' ratings from international rating agencies (S&P, Fitch, Moody's).
In a period of high interest rates, real estate will fall in real terms. In nominal terms it may rise, but always by less than deposit rates. Now is not the best time to buy real estate.
For other investment instruments, it is better to turn to professionals. It is not at all the right time to buy stocks, though there are interesting positions, but you have to search hard for them. Gold, precious metals, various derivatives and index securities also require deep analysis, which I certainly do not do.
Sincerely,
Galim Khussainov