Fixed term: how much do you need to invest to earn $100,000 per month

The data of inflation January, 6%, marked a sharp acceleration in the rate of increase in the general price level and nearly ended the brief period during which the bowl of interest of the deposits A determined time beat inflation. This afternoon, INDEC will announce the consumer price index for February, with the consensus of analysts expecting a figure above 6%. This figure will be decisive for retail deposits, since it rivals millimeter by millimeter the minimum rate of 75% nominal per annum at which the Central Bank obliges banks to pay their depositors.

The annual nominal 75% figure paid by deposits to 30 day CDD for individuals and for less than $10 million implies a direct return of 6.16% in one month. In other words, barely more than the inflation data for January, practically equal to the expectations that derive from the Survey of Market Expectations (MER) prepared by the Central Bank. 6.1% are expected for February and an acceleration to 6.3% in March.

However, at present the bowl interest on deposits determined time it is likely to be “positive in real terms” at least vis-à-vis expected inflation or, at least, to approach the course of prices. Expectations could be insufficient and monthly inflation in the near future could be higher than expected. With relatively stable financial dollars and the parallel, even, depositors can also positively count their returns in terms of dollars.

The race between prices, dollars and rates is even greater if you think of them in annual terms. In effective annual terms, the fixed term is now yielding a return of 107.05%. This performance is achieved in 360 days with firm durations of one month, successively, for one year. As long as, of course, with each new deposit, the initial capital and the interest collected are reinvested. That is to say, without taking a penny and renewing everything.

But what does this mean in terms of nominal returns? How much can be achieved in terms of results by putting savings into this type of deposits?

A fixed term of 30 days per $10,000at the current rate of 75%, returns once the term expires 10,616.44 pesos. That is, the $10,000 initial capital plus $616.44 interest. In annual terms, twelve consecutive fixed terms in which capital and interest are reinvested each time, return $20,499.63 after 360 days (assuming the rate remains stable during these twelve placements).

This way, if a saver has a goal of earning a certain amount of interest each month, they could know in advance how much they need to deposit to reach that goal. who will seek get $100,000 in 30 daysthen you should put $1,622,222.22more than USD 4,300 at the free exchange rate, in order to achieve these returns.

Indeed, the return of 6.16% per month translates into a profit of $6,164.38 for every $100,000 deposited. Which makes $100,000 in monthly interest the result of over $1,600,000 in initial capital.

However, it should be borne in mind that this result in terms of interest is not exactly a “gain” in an economy with such high levels of inflation as that of Argentina. If prices moved 6% in one month, a return of 6% on a financial investment over the same period would have gained nothing and lost nothing “in real terms”, as March-adjusted prices are called in the Inflation economics jargon. To obtain a profit in the strict sense of the word, in this case, the financial investment in question should exceed the rate of increase of the general price level during the same period. Below, the result is a loss.

In this sense, whether winning, losing, or tying against inflation, a saver would not make a full profit if he drew interest each month for his living expenses. If you did, if you rolled over the same initial face amount each time and withdrew interest earned every 30 days, you would be spending savings. decapitalize.

This can be a valid strategy to meet certain payments for a limited time or to extend the life of savings that need to be spent. But no more than that.

Similarly, if an investor has a goal of earning a certain amount of interest each month, they can know in advance how much they need to deposit to achieve that goal. who will seek to obtain $50,000 in 30 daysthen you should put $811,111.11approximately 2,150 USD at the free exchange rate, in order to achieve these returns.

Indeed, the return of 6.16% per month translates into a profit of $6,164.38 for every $100,000 deposited. This converts the result of more than $800,000 in initial capital into $50,000 in monthly interest.

The regulations which weigh on the interest rates oblige the entities to offer not less than 75% of annual nominal to the private individuals, for the deposits lower than 10 million dollars. However, there are isolated cases with lower yields.

Some entities pay less than 75% of the annual nominal.

At present, the traditional fixed durations to 30 days for natural persons and for not more than 10 million dollars pay a bowl 75% in nominal annual terms, which becomes 107.05% in effective annual terms.

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