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The high demand for Treasury bills across the EU is evidence of the commitment of small european investors to make their money work against inflation
Up to 600,000 Belgian citizens invested their money in government bonds during the government’s debt issue in the last week of August. This operation was a record in the nation where the capital of the European Union is located. This is even more impressive considering that Belgium has less than 12 million inhabitants, and the state managed to raise 21.9 billion euros.
This event is not a mere anecdote but evidence of a trend consolidated throughout 2023: Small european investors have taken a proactive stance when investing their savings.
This trend is the result of several interrelated factors. Firstly, inflation, which affects all EU countries to a greater or lesser extent, causes money to devalue, and investment is a way of avoiding it. Secondly, European banks, in general, and Spanish banks, in particular, have not encouraged investment through bank deposits because they do not have liquidity problems, so the interest rates they offer remain low.
In this scenario, government bonds have become a very attractive investment product for small european investors. However, the latest public auctions show that the profitability of these products has probably peaked. Hence, alternatives such as crowdfactoring platforms can be very attractive for small european investors who do not want their savings to be undermined by inflation.
This article will analyze why Inversa Invoice Market is an exciting investment tool for small european investors.
Inflation persists, and the fuel hike looks set to rise again
Although inflation is no longer at the historic levels it reached in 2022, it is still high, and in August, it increased by five-tenths of a percentage point. Thus, the CPI rose in Spain to 2.6% in August, and core inflation was 6.1%. Although food prices fell slightly, fuel prices rose by 7.2%, which suggests that inflation will rise again in the autumn.
The picture in the rest of Europe is no brighter; on the contrary, inflation is higher in many EU countries. In July, the CPI in the eurozone stood at 5.3%, with such essential states as Germany and Italy above the average (6.5% and 6.3%, respectively).
One of inflation’s most pernicious effects is devaluing people’s hard-earned money. That is why small european investors want to make their savings worthwhile by reaping interest on them to help eliminate the effects of inflation on their money.
They turn to traditional investment products that do not require substantial sums of money or financial expertise, such as government bonds or time deposits. However, following the emergence of FinTech, small european investors also have other alternative investment mechanisms to earn interest on their savings, such as crowdlending or crowdfactoring.
Bank deposits continue to offer low yields
The consolidation of retail investment platforms such as Inversa Invoice Market is particularly relevant in a context such as the current one, in which bank deposits offer low yields that do not offset the effects of inflation.
A year ago, bank deposits in Spain reported an interest rate of only 0.5%. This figure has risen to 2.3% today but is still among the lowest yields in the European Union.
Experts predict that yields will continue to rise and large banks will begin to compete for the savings of Europe’s small investors, but this is not expected to happen until next year.
In the meantime, what can small european investors who have traditionally relied on bank deposits do to earn interest on their savings? Can they resign themselves to the low yields? Fortunately not. Today, the range of options available to small european investors is vast. It consists not only of traditional financial institutions and governments but also FinTechs such as Inversa Invoice Market.
Treasury bill yields slow down their rise
As we pointed out at the beginning of this article, government bonds have been one of the star investment products of 2023. The Belgian case is paradigmatic, but the success of government bond operations has been similar throughout the European Union, thanks mainly to the increase in interest rates implemented by the European Central Bank (ECB) in recent months to tackle inflation.
If in January 2022, Treasury bills offered a negative yield, in July 2023, this reached 3.8% for 9-month bonds, a figure higher than that of bank deposits and a record. As a result, subsequent debt operations recorded interest rates below the July figure, showing that the public debt yield may have reached its ceiling.
In addition, another issue is affecting the ability of small european investors to make a return on their savings: the high demand for government bonds has meant that many people have yet to be able to invest in this product throughout 2023.
Because of the above, small european investors need alternatives to government bonds and bank deposits to cope with inflation. Hence, mechanisms such as crowdfactoring could be essential in enabling small european investors to invest their savings and, in the process, contribute to financing the EU’s productive fabric.
Inversa, a platform at the service of small european investors
Let’s start at the beginning: What is crowdfactoring? It is an investment mechanism in which multiple savers invest their money in invoices of companies in the real economy that have not yet been paid. In exchange for advancing the businesses the collection of the invoices thanks to their investments, the savers receive interest in advance.
Why is crowdfactoring an ideal investment vehicle for the millions of small european investors? It is a very simple-to-understand, tangible, transparent mechanism that offers fixed returns in the short term and gives savers the freedom to manage their money based on essential financial information. As if this were not enough, it allows small european investors to make their savings profitable quickly and without leaving home, thanks to first-class technological development.
Earn advance interest of more than 7% on average
The key to any investment is the return offered by the product. In the case of Inversa, the average profitability of the invoices marketed in the marketplace is over 7%. This figure is notably higher than the profitability of Treasury bills and bank deposits.
Moreover, unlike these products, interest are obtained in advance. Once an invoice is financed, all those who have invested in it receive the agreed interest. Once the debtor company pays the invoice, the small european investors get their money back.
In this way, the interest can be used from the second one to make new investments, thus boosting investment strategies.
Investing in the short-term
One of the attractions of 3-, 6-, 9- or 12-month government bonds and one-year bank deposits is that small european investors do not have to see their money held for long periods.
Because of their financial objectives or economic situation, some investors may opt for long-term investment products, e.g., pension funds. However, many smaller european investors need liquidity and room for maneuver. Hence, short-term investments are better suited to their investment strategies.
Inversa Invoice Market is a retail investment platform offering short-term products. The maximum expiration date of the invoices provided on Inversa is six months, typically no longer than 90 days.
Therefore, small investors who have bet in the past on 3- or 6-month Treasury bills can find in crowdfactoring a product with a similar return on investment term and which, in addition, offers them a significantly higher return.
Complete freedom in designing investment strategies
Compared to other investment mechanisms, Inversa Invoice Market is characterized by the following:
- Its usability. The platform is agile and intuitive; anyone can operate from it and control their investments.
- It allows investments from as little as 20 euros.
- The high level of financial information it offers. Profitability, credit rating of companies, terms, repayment analysis of the companies that provide their invoices and those that must pay them…
- To have a secondary market for invoices to sell investments ahead of time or to buy bills of exchange a posteriori.
- Empower small european investors to decide which companies they invest their money in.
- To have an investment automation tool so that savers can invest in the bills that fit their objectives without being permanently aware of the marketplace.
In this way, small european investors can make their savings profitable, protect themselves against inflation, and make all the investment decisions.
Focusing on the real economy and sustainability
Precisely, the total freedom that small european investors have in Inversa Invoice Market means that they can decide with full autonomy in which companies they invest and in which they do not. They can also opt for specific economic sectors. Or contribute to the success of socially and environmentally sustainable projects.
Thus, in addition to the classic investment derivatives (profitability, risk, time…), a new parameter to be taken into account is now included: the destination of the money.
Suppose up to now, we have been talking about economic trends (inflation, rising interest rates…). In that case, we must now consider a social direction: small european investors want to make their savings profitable and use them to contribute to the transformation of the EU’s productive fabric.
On Inversa Invoice Market, a Spanish investor can help finance a Danish wind power company, and a French saver can provide liquidity to a Greek sustainable agriculture farm or an Italian shoe company.
This crowdfactoring platform is the ideal place for small european investors to protect their savings from inflation, generate more money from them, and, in the process, contribute to the consolidation of innovative, wealth- and job-creating companies in the real economy.