If you have any savings, opening a securities account is a great way to make sure they keep their value. Money left on a regular bank account pays hardly any interests, while making investments through a securities account can even increase their value, especially in a high inflation environment like that of Hungary these days.
What is a securities account?
These days everyone has a bank account (or even more) that lets them manage their money easily. However, if you let your money lay simply on your bank account, you get hardly any interests on your savings (the standard yearly interest rate is around 0.01%). As a result, if you don’t live paycheck to paycheck, it makes sense to find a place for your savings that can give you a better interest rate that has a chance to keep up with inflation.
One option is to buy securities with your savings, which offer much better conditions. These days securities are traded electronically, and for that you will need a special type of bank account, normally called a securities account. Anyone can open a securities account, and they are available at most banks as well as from brokerages, and even from the Hungarian Treasury.
What kind of securities can you buy?
The two main types of securities you can buy are
- Stocks: which represent ownership, typically of a company. The value of the stocks increases with the value of the company, and you can sell them any time at their current value.
- Bonds: which represent a loan to, or IOUs from a company or a government. They typically pay an interest after a fixed time period.
If you consider Hungarian securities account, there is special type of securities account called TBSZ (Tartós Befektetési Számla, or long-term investment account), which is also available with most financial institutions. It has an advantage over regular securities accounts if you intend to leave your money there for at least 5 years, since then you will not be required to pay an interest tax, which is a serious tax benefit.
Self-managed securities account
Most bank and brokerages offer advisory for managing your securities. However, you may also decide to manage your securities on your own, buying and selling assets as you see fit. This offers you a greater freedom, however, you will also be fully liable for any adverse effects. At the same time, brokerages might be able to get access to better deals that are not available to any investor managing their securities on their own.
However you decide to manage your securities, it makes sense to create a diverse portfolio made up of various types of assets, and various assets in each type. These may include various government bonds with shorter and longer maturities, shares of various companies, ETFs (Exchange Traded Funds), and even packages with a mix of various items.
Inflation and securities
Inflation in Hungary is currently pretty high, although the yearly inflation is in a steady decline. As a result, the central bank’s base rate is similarly high, currently at 13%. If you intend to make a long-term investment to a securities account, this is the ideal time, as you will be able to take advantage of the high interest rates offered by financial institutions as well as the Hungarian Treasury.
Accounting and tax advisory
If you operate a business in Hungary as a foreigner, it makes sense to work in close cooperation with your Hungarian accountant to see how much dividend you can take either for your daily life or for other investments, and with a tax advisor to see how and where you should pay taxes after your income. Helpers Finance is specialised in working with foreign business owners in Hungary.
Are you looking for an accountant that can make sure you can keep tab of the finances of your business?
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DISCLAIMER: The information on this page is provided as general information only and it reflects the personal opinion of the authors. Nothing on this website constitutes investment advice or an investment offer as defined by Act CXXXVIII of 2007 (“Investment Service Act”), 4.§. (8) and (9). The content should not be used for financial or investment decisions, and it is not a personalized investment analysis. The information is provided without warranty of any kind. The authors, publishers and editors take no responsibility for any direct and indirect damage resulting from the use of the content of this site.
