A Czech investment leader on how modern tools can help you beat inflation

New research shows that at least a quarter of Czechs still keep their cash stashed away at home. While attitudes toward investing have begun to evolve, the options still remain limited, particularly for foreigners seeking solid investing advice in English.

But given today’s surging inflation, there’s no better time to get your money out of the sock drawer (or your savings account) and to consider taking the plunge, especially if you’ve decided to stay in the Czech Republic for the long term and your income is in Czech crowns. 

Jan and Eva Hlavsa started their investment platform Fondee in 2020 in an effort to bring the trend of passive investment to Czechia. With Fondee, clients take an investment questionnaire, and an investment portfolio is then suggested for them. They can choose from 14 portfolios that differ in their risk and yield, and now, along with classic portfolios, clients can also choose sustainable (ESG) portfolios. They can start investing from CZK 1000, and even small investments can turn into significant savings over time.

Jan and Eva shared their insights with us and offered some expert tips for securing your financial future, today.

Due to inflation, people are more interested in getting their money out of savings. Why is now a good time to take the investment plunge?

The markets have taken a hit in 2022. Market growth in the post-covid era was interrupted by Russia’s invasion of Ukraine, inflation, and interest rate growth. The value of stocks plummeted and there is talk of a coming economic crisis. 

To new investors, this might seem like a terrifying time to invest. But the opposite is true. Now that markets are down, the cost of stocks is low and has potential to grow faster once markets recover. And they always do. For example, after the market drop during Covid in 2020, the markets recovered in less than 6 months. This is why we say that investing now is like buying stocks when they’re on sale; it’s cheaper. Besides rising inflation, this is another great reason to start investing now. 

And that’s reflected in the growth of your platform?

Yes. Despite the economic situation, Fondee is still growing. We have entered Slovakia and will soon enter the Polish market too. In 2022, our client base rose by 40%, which means it grew by almost half. What’s more, our clients understand that this is not the time to panic, but to invest more.

What is the investing landscape like in those other countries? 

The landscape is very similar to Czechia. In general, Central Europeans are eager to jump on the investment bandwagon. But throughout the region, most investment is still done through mutual funds. Unfortunately, these often have non-transparent fee structures, and the fees can amount to around 2-3% of the amount invested annually, which can take a significant bite out of your investment yield. This is why we see that in all these countries, there is space for a platform like Fondee, which disrupts the investment landscape by providing a service that’s not found elsewhere. 

For those who are new to investing, what’s the first step? How can you assess your financial health, and how do you know if you make enough to invest?

The healthiest way to invest is to only invest money that you will not need anytime soon, to invest regularly (ideally to set apart a certain amount from every paycheck), and to never put all your eggs into one basket (i.e. to diversify your portfolio).

Here in the Czech Republic, who is your typical client?

We are an online platform, so our clients are typically digitally savvy and younger – the average age of our clients is 35. However, we strive to make our platform easy to use for everyone, and we’re proud to have clients across all age groups. We have one client who is over 90!

We’re also happy that recently, the number of women investing with us has grown and now, 40% of new investors are women. Also, almost two-thirds of our investors are regulars who have a standing order and invest with Fondee on a monthly basis.

It’s funny you mention women investors because you recently posted on LinkedIn to highlight an incredibly sexist ad about women and investing. I think in a country where the gender pay gap is so pronounced, it’s really important for women to protect their hard-earned money. Why is it so important for women to invest?

Well, according to our research, women earn less but also tend to live longer. That leads to lower pensions and, therefore, lower living standards after retiring. Growing the value of the money they have is one of the ways for them to close the gap. This is why it is important for women to start investing more. However, women still tend to invest much less than men, although from our perspective, there is no rational explanation for this difference. 

Could you create a portfolio for kids? Or do you have to be 18 and over to invest? Could this be a nice way to grow funds for your children?

We are planning to introduce portfolios for children, so yes, this feature is something to look forward to.

I would say that for most beginning investors, men or women, following the market is tricky, especially if you don't speak Czech. How does Fondee help mitigate all the work that goes into researching and analyzing the market?

It can be difficult and time-consuming to create and manage a portfolio. Fondee does this on behalf of clients. Our clients simply fill out the investment questionnaire, and Fondee suggests a portfolio with an appropriate risk level. 

And that makes Fondee easier than going to an investment broker?

Investing through a broker means building one's own portfolio and choosing the right products. The core of our product is saving clients the time they would spend doing this, while offering lower fees than those they would have to pay when managing their portfolio directly.

At Fondee, clients choose their investing profile (we can't do this for them), and voilá! Their diversified portfolio is ready to go.

You have different investor profiles to help people decide how much risk they’re willing to take on. Which of your profiles is most popular?  

All our profiles consist of diversified portfolios. Since our clients tend to be younger, many tend to go on with the Audacious profile, which is our most dynamic one. It’s predominantly stock-backed, with a high proportion of stock ETFs (Exchange Traded Fund) and a very small proportion of bond ETFs (15% or less) and cash (5% or less). 

If you’re a “Conservative Investor,” you might feel more comfortable with a portfolio that contains 70-90% of bond ETFs and only 10-30% of stock ETFs. Right now, our sustainable (ESG) portfolios are very popular, with almost 70% of our new clients choosing ESG portfolios.

Can you tell us a bit more about your sustainable portfolios? What does ESG mean?

Sustainable investment is a booming trend in the West, and we are excited to be among the first bringing this trend to Central Europe. Sustainable investing, or ESG investing, means investing in companies found by international ratings to be responsible for their environmental, social, and governance factors. 

Contrary to what many believe, sustainable portfolios have historically been more profitable than standard portfolios (such as the S&P 500 index). So it’s no wonder that sustainable investment is on the rise, given that investors benefit both morally and financially.

You said one of the main challenges for foreigners in Czechia trying to get started with investing is that there aren’t many investment platforms in English. Are there other challenges? Is nationality an obstacle to investing (e.g. EU vs non-EU citizens?)

At Fondee, you can invest in English. However, due to regulatory and tax constraints, only EU residents can invest with us. For EU residents, there are no obstacles to start investing with Fondee. We can also help tax residents of Czechia with tax compliance, although this service isn’t available for clients who are tax residents elsewhere.

Tell us why we should put our money in your hands?

Eva: I lived and worked in London for many years, including a six-year career at Morgan Stanley as a Vice President. I hold two master's degrees in economics, one from the University of Cambridge, and the other from the Institute of Economic Studies at Charles University. At Fondee, I am responsible for portfolio & risk management. 

Jan: While living abroad, I worked at Greenstone Resources, a $500-million private equity fund, where I spent over two years managing investors' finances. I studied economics at the London School of Economics and Political Science, and I completed my bachelor's degree at the Institute of Economic Studies at Charles University. At Fondee, I handle compliance and cash flow, and I work with investors to optimize their strategy.

Our previous experiences abroad mean Fondee brings international best practices and the most modern investment methods to Czechia. By investing with us, you can beat inflation while saving valuable time and energy; and you can even protect the environment while doing so, through sustainable investing. Whether you’re an experienced investor or a newcomer, we can turn your savings into a success story.