Navigating Inflation in the Czech Republic: Experts Recommend Conservative Investment Tools

The growth of consumer prices in the Czech Republic has been one of the highest in Europe since last year, and the annual inflation rate is still in the double digits. This forces Czechs to think more about where to save their money or how to invest it wisely to minimize the impact of inflation.

The offer of conservative savings products is relatively limited, and standard savings accounts and short-term deposits can be used. However, it is necessary to remember that interest rates on savings accounts, which also have the advantage that money can usually be accessed immediately, are now between five and six percent per year. Still, the interest rate drops after a certain amount.

Experts recommend other conservative investment tools, such as money market mutual funds or short-term investment funds. “All of these instruments offer significantly higher long-term interest rates than ordinary accounts, which usually do not earn interest at all, and at the same time provide high liquidity, which is important for these products,” said Lukáš Urbánek, a financial advisor at Partners Group, to Právo.

The interest rates have been stable for some time now, related to the development of the Czech National Bank’s rates. “These basic savings instruments aim to manage a contingency reserve or temporarily increase funds intended for the near future, i.e., within two years,” he added.

However, those who want higher returns must invest elsewhere, ideally in stocks, and consider higher risks. For example, stocks on the Prague Stock Exchange lost nearly 16 percent last year. “We must accept that conservative savings will not protect us from inflation. Obtaining a risk-free yield with the required liquidity above the inflation rate is impossible. Such a tool does not exist. With a conservative strategy, we prefer low risk and liquidity over a return,” said Urbánek.

However, this does not mean that these financial products are meaningless. “They help us efficiently manage our shortest reserves. But we should always carefully consider what weight they should occupy in our portfolio. What contingency reserve do we need, and what extraordinary expenses await us shortly? All of these goals should ideally be secured, and all other reserves should already be managed in other instruments with the potential for higher returns,” he added. According to him, almost everyone knows the inflation risk, and people are gradually adjusting their savings strategies.