In the case of corporate bonds, for example, the problem is that they often involve extremely high risk. Your income depends on one company or group, which could cause you to lose a large part of promised money if it goes bankrupt. Additionally, their disadvantage is that income must be taxed. Taxes are also a disadvantage with dividend stocks because dividends paid are subject to taxation. Renting real estate is not completely passive income. Caring for property (especially if you have several) requires a lot of time and energy. You must handle minor repairs as well as major renovations, broken doors, or lease agreements. From our perspective, the purpose of assets should be to free you from such hassles so you can spend more time with family or hobbies.
In the case of the 2nd and 3rd pension pillars, the biggest disadvantage is investment setting during the payout phase, i.e., after retirement. During this phase, savings are almost exclusively invested in bonds, although many people plan to withdraw their pension for more than 10 years. For such a long period, it is better to add stocks to the portfolio so you do not lose returns and can enjoy a higher income from your assets.

When recommending a suitable strategy and withdrawal amount, the robo-advisor considers several factors. First, it looks at how much you will depend on income from Finax. If it is your main source of money, it will recommend lower risk. It also takes into account whether you want to preserve your assets’ value for future generations or spend it all. If you want to spend it all, you can afford a higher monthly income. Lastly, we ask if you are willing, during market downturns, to be frugal and withdraw a somewhat lower amount from your portfolio. If yes, you can afford a slightly riskier strategy and higher income during growth years.

Both Smart Deposit and Wallet consist of short-term bonds and instruments tracking short-term interest rates set by the central bank. However, unlike Smart Deposit, Wallet contains bonds with slightly longer maturities.

Therefore, the value of savings in Wallet will fluctuate a bit more than in Smart Deposit. In exchange, it should generally offer higher returns during most periods.

Smart Deposit is more suitable if you need your savings within one year (e.g., for a vacation or tax payment) or if you do not want to see any value fluctuations. On the other hand, if you will need your savings in 1 to 3 years (e.g., for a car replacement or major home renovation) and are willing to accept some value fluctuation in exchange for higher returns, you should choose Wallet.

We have also written a separate blog on this topic. Read it for more information about the differences between these products and examples of situations where they are appropriate.