RIGA - Latvia's record inflation rate this year has put a dent in investment possibilities, as the real value of money invested declines. Experts have suggested that the best forms of investment are currently stocks and certain investment funds, while in the long-term, accumulative pension schemes would be best handled by private funds.
Additional private pension investments or insurance funds have also been recommended.
In July Latvia posted an annual inflation rate of 6.7 percent, a seven-year high.
Experts said that considering the rapid price increases, traditional banking deposits were no longer cost-effective, as the average interest rate on deposits is 3.9 percent. Likewise, investment funds in local fixed-income securities and banking deposits were no longer attractive.
Furthermore, real estate investments in Latvia were also not as safe as they once were, since experts have been saying for some time now that property prices have been blown out of proportion.
Roberts Idelsons, head of asset management at Parex Bank, said that with the current pace of inflation, he was recommending people to invest their cash in stocks and investment funds with specific or neutral strategies - e.g., the Central and Eastern European Stock and Obligation Fund, as these offer a better return than global investment funds.
Index funds are also rather attractive, since they can bring in double-digit returns.
Rudite Zvirgzdina, head of the banking association's private pension fund committee, said that privately managed pension funds were the safest way to go when concerning pensions. She stressed that short-term high inflation did not mean that the return on investments would be bad in the long-run.
