How to make a return if you have 1 million

Once upon a time, you were a part of the absolute wealthy elite if you were a millionaire. This is not the case today, since the statistics for several years have shown that the average Dane has a fortune of a million when everything is counted.

If you have a million to invest for, you will be affected by the low interest rate level - especially if you have the money in cash or in bonds.

The interest rate on Danish government and mortgage bonds, which is traditionally seen as safe investments, is so low that the return on costs may be negative. And if interest rates rise again, you may be affected by capital losses.

 Properties

Although banks have sharply reduced their deposit rates, several experts recommend that investors with one million place a portion of their assets on a high interest account where the money is bound in for example two, five or ten years.

It's a good idea to use the high interest account as a cushion if stock prices fall. It believes Rune Wagenitz Sørensen, a partner at Miranova, is doing asset management for a number of private investors.

Normally, bonds can be used to hedge price falls in times when stock prices are high. But today bonds are no longer a safe buffer. Because of the low interest rate level, it is hard to imagine that bond prices will rise suddenly, even if stock prices should fall.

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"One should not expect that if one's shares fall 20 percent, the bonds will rise five percent. This probably does not apply in the coming years. The normal mechanism is out of play, "says Rune Wagenitz Sørensen.

On price comparison pages like Mybanker.dk you can send their money in the tender and find out where to get the best interest rate. However, you should not place more on a bank account than the $ 750,000 covered by the Deposit Guarantee Fund. This will ensure a loss if the accident is out and the bank goes down.

"If you get over $ 750,000, you should go for one of the major SIFI banks, which has been designated as particularly important for the Danish economy," says Karsten Hannibal, partner of the investment consulting company Optimal Invest, adding:

"There is a lot of liquidity in the market, so nobody gets a very high interest rate - not even on a high interest account. But there are still some places where you can get a nice deposit rate. You just have to look for them. "

 Kjeld Kirk Kristiansen

For example, if ten percent of the assets are placed in cash, experts still recommend that the rest be divided between equities and bonds, thus spreading the risk.

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Higher yield options

There are different alternatives to the Danish government and mortgage bonds, which generate a higher return. These include corporate bonds, high-yield bonds such as Brazil, Argentina, Russia and China, and so-called high yield bonds, where credit risk is above average. However, in most cases, such investments require professional advice because it can be difficult to assess whether the return is worth the risk.

"When people invest in high-yield bonds or emerging-market bonds, they think things are as they should be because they also have bonds in the portfolio. The problem is that such bonds behave as shares. They do not provide stability and robustness if the accident is out. The only thing that provides ultimate security is state and mortgage bonds - although they are very useful at the moment, "says Karsten Hannibal.

  Money

If you have a million dollars to invest for, it is difficult to achieve the necessary risk spread by buying single shares. Instead, you can go for investment associations. Here, however, the low interest rate means that it is extra important to pay attention to costs.

 "The low interest rates have been a wake up call for those with relatively low risk, such as in pure bonds or mainly bonds with very low equity. With the costs that you have to pay in investment associations, you can risk the return being very low or even negative, "says Karsten Hannibal.

In his opinion, a bond department in an investment company should not cost more than half a percent in costs a year. A mixed division of shares and bonds should not cost more than 0.8 percent, while a clean equity department should not cost more than 1 percent.

In the so-called passive investment associations that follow the market but do not try to beat it, the costs are lower. If you choose an active investment society, it is important to make sure that it has previously been able to provide investors with a return.

Morningstar, which provides data on investment opportunities, has a rating system on its website, where the company assesses the ability of the investment associations to beat the market. However, it is even more important to keep an eye on whether the investment association continues to provide a good return.