Where to invest money – is there an slternative to bank deposits in Ukraine?

Mariia Mygal

What tools do Ukrainians use today to preserve and accumulate their savings? The answer to this question is simple: these are mainly bank deposits, real estate, and savings “under the pillow.”

For a long time, bank deposits were almost the only way for many Ukrainians to earn passive income and save money. However, this type of investment is gradually losing its former popularity, primarily due to lower interest rates and a decline in confidence in financial institutions. 

It is still too early to talk about any Ukrainian investment traditions, but we can observe and analyze the formation of the rudiments of investment culture. The search for successful ways of investing and additional sources of passive income is increasingly occupying the minds of Ukrainians, especially the younger generation.

We propose to find out whether there is an alternative to deposits in the Ukrainian market today.

Passive income is not always a guaranteed and risk-free return

Passive income is generally considered to be income that is not related to any daily activities. Let’s look at investment instruments that can generate income:

  • Renting out real estate and other property (you won’t make quick money with this type of investment, but the risk of losing money quickly is close to zero);
  • bank deposits in hryvnia or foreign currency (the average interest rate on deposits at the beginning of the year was about 8% per annum for long-term deposits and more than 10% for short-term deposits). 
  • precious metals (unlike stocks and banknotes, which can turn into a useless pile of paper in the event of a financial collapse, gold and silver will always have material value);
  • cryptocurrency (Ukraine is among the three world leaders in the use of cryptocurrency);
  • secured lending (there is no risk of losing the deposit, as the client’s creditworthiness is guaranteed by notarized mortgage and loan agreements);
  • domestic government bonds (OVDPs) – the current yield is significantly higher than the yield on the corresponding deposits;
  • shares of companies (investments in shares and trading on the stock exchange bring considerable profit, but such activities are associated with significant risks – share prices and shares themselves are constantly moving, they pass from one owner to another, and their value rises and falls);
  • corporate bonds are a medium-risk instrument. Over the past 5 years, the National Securities and Stock Market Commission has not reported any defaults on corporate bonds of Ukrainian companies;
  • franchising (one of the most convenient models for the development of small and medium-sized businesses, which minimizes the risks for start-up entrepreneurs).

What to choose, how to calculate possible profits and predict risks? These are the questions a potential investor faces. The lack of information and knowledge on this issue is perhaps the main reason for the embryonic state of the investment market in Ukraine.

The biggest disadvantage in investing is the poor financial literacy of Ukrainians.

Investing in victory

In Ukraine, an effective and reliable investment instrument traded on the stock market is military bonds. These are government securities issued by the Ministry of Finance of Ukraine. They are called war bonds because they are placed during a war. The proceeds from the bonds are used to meet the needs of the Armed Forces and other financial needs of the state under martial law.

When you buy military bonds, you get a guarantee from the state that the entire amount of your investment will be repaid and interest will be paid, and you also get a fixed yield for the entire period of the securities’ issue.

Today, you can buy bonds named after the temporarily occupied cities and territories – Crimea, Donetsk, Luhansk, Melitopol, Mariupol, and Horlivka. Each bond has a maturity of up to 1.5 years.

Military bonds can be purchased 

  • on the public services portal DIIA;
  • at primary dealer banks and licensed brokers.  

When purchasing these bonds, you do not need to pay additional commissions to the seller, income tax, or payment fees.

You can even buy just one bond. Their prices start at UAH 900, with a nominal value of UAH 1000 each. They can earn up to 16% of income. 

The total income will depend on the type and value of the bond, as well as the yield as of the date of purchase.

Where is the best place to invest?

There is no definitive answer. When choosing an investment instrument, you need to start from the realities and goals of the investment, and you should take into account how the money was earned and what it is needed for. Everyone’s situations and goals are different: someone invests to buy an apartment or a car, and someone invests for retirement. There is no and cannot be a universal answer on how and where to invest.

For example, a person has $100 in savings. Where should he go with it? If the money came easily, then the person will treat the risk of losing it the same way: as it came, so it went. If they got the money through hard work, they will most likely not want to risk it.

Passive income also depends on how open-minded a person is. For example, there are people who do not trust the state and the national currency. They prefer to keep their money in banks or on deposit in dollars, receiving ridiculous interest that does not cover inflation and taxation. And here we can no longer talk about capital growth, but only about how to safely send money to the bank for safekeeping.

In any case, before investing, it is better to think about and clearly answer the following questions: what is the purpose of my investment, for how long am I willing to invest, what things may be of interest to me and what are unacceptable, and whether I want to invest at all. Even simple answers and analysis of these questions will make the task easier and help you decide where to invest.

Today, military bonds are not only a way to save and grow your money, but also a significant help to the state in times of war. By purchasing them, you “kill three birds with one stone”:

  • help the Armed Forces and increase the country’s defense capability;
  • support the state economy and stimulate its work;
  • receive higher and safer income than from a deposit.

So, we believe in our defenders, invest in victory, and everything will be Ukraine!

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