Where to Invest for 1 Year: Poste Savings Bonds, Deposit Account, or Treasury Bills?
Where to Invest for 1 Year: Post Office Savings Bond, Deposit Account, or BOT?
Investing in the short term can be a challenge for many savers, especially in an uncertain economic context.
For those looking for a safe and profitable short-term investment, it is essential to evaluate the various alternatives available on the market: in addition to choosing between classic Deposit Accounts or Post Office Savings Bonds, investors can also consider the 1-year Post Office Savings Bonds, a new option from Poste Italiane.
New 1-Year Post Office Savings Bond
Post Office Savings Bonds have been a historical and popular investment form in Italy, appreciated for the safety of the capital and ease of use.
Recently, Poste Italiane introduced a novelty: the Premium Bond, a variant of savings bonds with a duration of just 12 months, making it an interesting option for those seeking a short-term investment without compromising the safety of their capital.
Main Characteristics of the Premium Bond:
The Premium Bond offers an annual return of 3.5%.
Unlike other Post Office Savings Bonds that require a minimum commitment of four years, this bond allows you to obtain the maximum return after just one year.
This feature makes it particularly attractive for those looking for a secure investment without wanting to tie up their capital for a prolonged period.
To access this offer, you need to have a postal booklet, which can be opened concurrently with the purchase of the bond.
The Premium Bond is issued exclusively in dematerialized form and can be purchased through the booklet in both the Smart and Ordinary versions.
The flexibility of this instrument allows you to withdraw the capital at any time without losing the accrued interest, offering greater management freedom compared to other tied-up investment forms.
Returns and Simulations:
To better understand the earning potential offered by the Premium Bond, let’s consider some practical examples.
Investing 10,000 euros would result in a final capital of 10,306.25 euros, with a profit of 306.25 euros.
Although these returns may seem modest, they still represent an increase in capital without any risk of loss, a feature that makes Post Office Savings Bonds a solid choice for those looking to protect their savings from inflation and market volatility.
12-Month Deposit Account
Another very popular short-term investment option is the tied-up deposit account.
This solution offers the opportunity to obtain an interesting return over a relatively short period, with minimal risk and simple management.
Main Characteristics of Deposit Accounts:
Tied-up deposit accounts offer a fixed interest rate for the entire duration of the tie-up, ensuring a certain and predetermined return.
In May 2024, the best offers for 12-month deposit accounts come from MeglioBanca and Cherry Bank:
MeglioBanca offers a gross rate of 4.3%, and Cherry Bank offers a gross rate of 4.25% with quarterly interest payments.
Returns from Deposit Accounts:
Suppose you invest 10,000 euros in a tied-up deposit account with MeglioBanca.
With a net rate of 3.18% (considering the 26% tax rate on interest), the net profit, excluding the 0.2% stamp duty, would be 298.20 euros after one year.
Opting for the Cherry Bank deposit account would result in a net return of 294.50 euros with a net rate of 3.15%.
While the difference between the two accounts is minimal, it is important to consider the interest payment method and any specific conditions of each bank.
Advantages and Considerations on Deposit Accounts:
Tied-up deposit accounts offer security similar to Post Office Savings Bonds while providing the possibility of higher returns due to higher interest rates.
However, unlike the savings bonds, tied-up deposit accounts require that the capital remains locked in for the entire tie-up period to obtain the maximum return.
Although it is possible to withdraw the capital before maturity, this may result in the loss of accrued interest or the application of penalties.
In the case of Post Office Savings Bonds, it is possible to receive a 100% refund of the invested capital even before maturity, while interest is not paid.
BOT May 2025
Treasury Bonds (BOT) represent another short-term investment option, particularly suitable for those looking to invest in Italian government securities.
BOTs are secure financial instruments issued by the Ministry of Economy and Finance, guaranteeing capital repayment at maturity and a return based on the purchase price.
Main Characteristics of BOTs:
12-month BOTs are zero-coupon securities, meaning they do not pay periodic interest but are issued at a lower price than the face value and redeemed at 100 at maturity.
For example, the BOT expiring in May 2025 (ISIN IT0005595605) offers a gross effective return of 3.56%.
By purchasing the security at a price lower than the face value, the profit comes from the difference between the purchase price and the redemption value.
Returns from BOTs:
The net return of BOTs is influenced by the favorable 12.5% tax rate on accrued interest.
Assuming an investment of 10,000 euros in BOTs expiring in May 2025, the gross return of 3.56% would result in a gross profit of 356 euros.
After applying the 12.5% tax, the net profit would be approximately 311.50 euros.
Comparison with Other Investment Options:
BOTs offer high security and tax advantages with returns comparable to BTPs.
For example, the BTP expiring in June 2025 (ISIN IT0005090318) guarantees a gross return of 3.55% (net of 3.11%) at a price of 98.02 euros, while the BTP expiring in May 2025 (ISIN IT0005327306) offers a semi-annual coupon of 0.72%, with an annual gross return of 3.55% (net of 3.10%) at the current price of 98.07 euros.
For investors prioritizing capital safety and investment transparency, BOTs remain a reliable choice, especially considering the current context of favorable interest rates.
Conclusions:
When it comes to short-term investing, the options of Post Office Savings Bonds, deposit accounts, and BOTs offer different solutions, each with its own advantages and specific features.
Post Office Savings Bonds, with the new Premium Bond offer, provide safety and competitive returns without stringent constraints.
Tied-up deposit accounts, with high interest rates, are ideal for those seeking a certain and immediate return, although they involve a stricter time constraint.
Lastly, BOTs guarantee the safety of Italian government securities and favorable taxation, representing a solid choice for more conservative investors.
Summarizing in this table the returns of each of the three options, assuming an investment of 10,000 euros:
| Product | Expiration | Gross Return | Tax Rate | Stamp Duty | Net Return |
|---|---|---|---|---|---|
| Post Office Savings Bond | 1 year | 3.50% | 12.5% | 20€ | 2.86% |
| Deposit Account MeglioBanca | 12 months | 4.3% | 26% | 20€ | 2.98% |
| BOT IT0005595605 | May 2025 | 3.56% | 12.5% | 20€ | 2.915% |
The choice of the most suitable investment option depends on the specific needs of each saver, their risk tolerance, and short-term financial goals.
Carefully evaluating the characteristics of each product and comparing net returns can help make an informed decision, ensuring optimal management of savings over a one-year timeframe.
DISCLAIMER: The information and considerations contained in this article should not be used as the sole or primary basis on which to make investment decisions.
The reader maintains full freedom in their investment choices and full responsibility in carrying them out, as only they know their risk tolerance and time horizon.
The information contained in the article is provided for informational purposes only, and its disclosure does not constitute and should not be considered an offer or solicitation to the public for savings.
