The risks of BTP A value that no one (or almost no one) talks about

While many dare to use BTP Valore, few are careful to inform savers about all the aspects to consider, especially the risks.
Notoriously, investing in the bond market is considered much safer, for example, than investing in shares, thanks to the invested capital guaranteed at maturity.
If you buy 1,000 euros in BTP Valore currently being issued, when it expires – in 2030 – you will get back all the 1,000 euros invested, increased by the loyalty bonus of 0.7%, in addition to having benefited from the quarterly coupons (on which taxes are paid).
Put like that, it all sounds fantastic.
But to understand how things really are, it is necessary to know, in detail, all the risks of the BTP Valore.
The risks of the BTP Valore that no one (or almost no one) talks about The risks linked to government bonds move on several levels and it is at least a duty to illustrate them all in detail for the benefit of the reader interested in the BTP Valore today.
1) Interest rates The first is linked to interest rates.
In an economy where interest rates rise, the price of the BTP Valore on the market would fall as it is dumped by investors in favor of other BTPs with higher coupons.
The coupon rate for government bonds, in fact, is fixed or pre-established, even in the case of the step-up mechanism that characterizes the BTP Valore.
Although the prospects today do not point to an increase in ECB rates and the medium-short duration of the BTP under analysis (6 years) mitigates the risk, it is still a factor to take into consideration.
Especially from those who may need to liquidate the investment before maturity.
In fact, the saver who holds the security until maturity in a context of rising rates does not record losses, because he receives the invested capital back at maturity and continues to enjoy his coupons, as expected.
But anyone who needs to liquidate the investment, perhaps because they need some money for a sudden expense or an unexpected need, would be forced to sell on the market at a lower price than the purchase price (during the issue is purchased at nominal value, i.e.
100), and would therefore record losses.
read also Btp Valore, is it worth buying? 2) Issuer risk Another risk is that of the issuer's insolvency.
The issuer of the BTP Valore is the Italian State.
In other words, when investing in government bonds there is the possibility that Italy will go bankrupt and will not be able to honor its debts with its creditors, or at least not all of them.
Our country is fifth in the ranking of countries with the highest deficit/GDP ratio in the world.
That Italy will go bankrupt is a remote hypothesis but, here too, it is a risk that cannot be ignored.
3) Lack of diversification The lack of diversification of the investment portfolio constitutes another crucial risk that at least is worth talking about.
Thanks to the very easy access to purchasing the BTP Valore – just open your home banking or go to the bank or post office counter – autonomous investment on the direct market is encouraged.
This means that even savers who do not know the markets, ignore the precautions to be taken and, above all, the importance of building a well-balanced portfolio can buy BTP Valore.
Are you a saver and do you want to invest in government bonds rather than other instruments because they seem safer to you? The choice is yours, but to protect your investments (and therefore your money) the advice is to diversify the issuers (therefore do not buy only BTPs but also government bonds from other countries) and the maturities, not focusing only on the short nor only in the medium-long term.
4) Hazy communication Other risks hide behind unclear communication regarding the functioning of the BTP Valore, which risks falling into the territory of the "misleading".
The MEF, and national newspapers leading up to sector blogs, speak of the BTP Valore as a very convenient investment for small savers.
However, considering the weight of inflation and observing the market, the yield offered by this particular BTP – at least according to the minimum coupon rates currently guaranteed – appears in line with what is already offered on the market, or in any case not extremely more convenient.
Finally, it is necessary to underline the lack of clarity in the advertising spot that is airing on TV these days.
The message that shines through is that it is an investment with an immediate return, so much so that you can immediately afford a nice cruise.
This prospect, however, can only be achieved with a huge investment.
To give an example, in order to obtain a return of 5,000 euros at maturity, therefore in 2030, it would be necessary to invest at least 20,000 euros today.
It now appears clear that the BTP Valore does not represent a turning point for the saver, but one of the many possibilities available on the market that can be selected and included in a well-balanced investment portfolio.