“How to reduce risks when choosing instruments for investments in Ukraine”, — write: epravda.com.ua
Real estate, deposits, bonds and crypto-assets remain the main investment tools for Ukrainians. While we are significantly different from other countries that have developed financial markets and infrastructure that allows investing in shares, their derivatives, as well as in pension and other specialized funds. At the same time, the development of the markets, the maturity of the infrastructure and the reliability of prudential control allow both professional and retail investors to feel confident. If we consider the investor profile in the United States, the average American gets his first real estate at around 40 years old, and his first shares, through participation in pension schemes or pension funds, from the moment he starts working and making deductions to various independent of the state institutions Ukrainians still do not have access to a variety of financial instruments, as well as their own developed stock market. As for the market of debt instruments, in Ukraine today, as a publicly available instrument, there are only domestic state loan bonds. Our government securities are classified from RD (Restricted Default) to SD (Selective Default) depending on the agency, indicating that these securities are high risk. But let’s analyze and evaluate each instrument in more detail. Advertisement: Real estate Real estate often takes a leading place among investment instruments in countries where access to other financial instruments is limited. In Ukraine, this market remains popular thanks to the various offers of developers, which allow investors to find attractive options. Read also: Investments in resort real estate: where to look for stability and profitability in 2025 In practice, the real estate market in Ukraine functions similarly to the stock market: investors invest in construction at the early stages, take risks, evaluate the reputation of the developer and the prospects of the object. Upon successful completion of the project, the yield can be 10-15% per annum, which is comparable to expectations from investments in stock markets. Advertising: However, such results are possible only under the conditions of successful project implementation and a stable economic situation, which is currently characterized by high risks in Ukraine. In addition, the value of real estate often increases under the influence of inflationary processes, urbanization trends and the limited amount of land resources. Similar behavior of investors is observed in some countries of the European Union. However, in these regions, real estate investing is largely dictated by business culture and personal preference. For example, in Cyprus, real estate is the leading direction of investment, which is explained by both cultural features and economic factors. The local market has traditionally attracted foreign investors, and Ukrainians in particular, due to the demand for tourist facilities, as well as historical programs of citizenship by investment, which operated before, or relocation programs that continue to operate. At the same time, the markets of shares and debt obligations remain poorly developed, which further strengthens the position of real estate as the main investment asset. Despite the growing role of Cyprus as an international financial hub serving investment funds, cryptocurrency exchanges and other professional market players, real estate continues to dominate investment priorities. This is due to relatively low risks compared to the stock market. At the same time, the expected return in the range of 4-7% per annum is quite modest, but it is compensated by the stability factor. Deposits In today’s world, deposits have largely lost their appeal as an investment instrument, especially in countries with developed financial markets. In Europe and the USA, deposit rates were kept at a low level (1-2%) for a long time due to the policy of central banks aimed at stimulating economic development. This made deposits unsuitable for compensating inflationary losses and unattractive to investors. However, from 2022, due to rising inflation and tightening monetary policy, deposit rates began to rise. In some countries, such as the USA, the yield of savings accounts in 2023-2024 reached 4-5%. Strict requirements for banks after the 2008 crisis, in particular the Basel III regulations, forced financial institutions to increase the level of capitalization and form significant reserves. This limited the ability of banks to offer high deposit rates, which also affected their popularity among investors. The situation is similar in Ukraine. Deposit rates often do not cover inflation, and real returns are negative. For many investors, it is more profitable to invest directly in domestic government bonds (OVDP), which provide higher yields and guarantees from the government. In particular, Ukrainian banks attract funds through deposits, and then reinvest them in OVDP, reducing their own risks. For an investor, this means that it makes no sense to use a bank as an intermediary, if you can buy government bonds yourself. Still, deposits remain popular among retail investors due to the ease of opening accounts and the protection of deposits through the Individual Deposit Guarantee Fund. For many people, this is a more accessible and understandable way to save money compared to direct investment in financial instruments that require some knowledge and access to markets. Deposits are no longer an instrument that provides high returns or effectively offsets inflationary losses. However, they remain attractive to conservative investors due to their simplicity, reliability and funds protection guarantees. However, professional and more experienced investors should consider alternative instruments, such as OVDP, which can provide a higher level of return without the involvement of banks as intermediaries. Crypto-assets Crypto-assets are a popular investment tool for Ukrainians, and Ukraine is one of the world leaders in the volume of transactions with crypto-assets. A large part of Ukrainians use crypto-assets as a means of saving capital, investing or conducting international transactions, avoiding the limitations of the traditional financial system. Its popularity is due to the high level of digital literacy of the population, the instability of the national currency and the possibility of free access to global markets. All this has made crypto-assets an important instrument of financial activity, despite the risks and lack of legal regulation. Despite the adoption of the law “On Virtual Assets” in 2021, there is still no clear regulatory framework for regulating virtual assets in Ukraine. This means that users and investors operate in a “grey area” where there is no legal protection in cases of fraud or technical failures. Moreover, banks and other financial institutions often make it difficult to transact with crypto-assets for fear of regulatory sanctions or market volatility. At the same time, the issue of tax reporting remains open, which creates additional risks for users. P despite these challenges, cryptoassets have significant potential for development in Ukraine. This tool not only allows you to join the global financial ecosystem, but also promotes the development of domestic blockchain startups that gain international recognition. However, for the further growth of this market, it is necessary to create a transparent legal field that will ensure the security of transactions, protect investors and help avoid conflicts with international financial organizations. Crypto assets can become a powerful driver of Ukraine’s economic development, provided their use is regulated. Investments in shares In real life, there are artificial examples of “bringing” shares of global companies into the country, which, in addition to the main purpose of investing, are also used to withdraw money from the country. This is a limited exclusive route, where the buyer pays an additional premium of about 10% for the opportunity to buy these shares, to then sell them and get the money in their own currency account. That is, in such a case, it would be more correct to speak not about an investment tool, but about a tool for bypassing existing restrictions. In addition to such “equity-tools” for the withdrawal of capital from the country, it can be argued that there is no stock market as such. REIT funds The lack of REIT funds in Ukraine is largely due to structural and psychological barriers. Although this real estate investment mechanism is recognized worldwide as effective and convenient for investors, its implementation in Ukraine remains limited. The basic idea behind REITs is that businesses avoid owning real estate because their operating profitability often far exceeds the return on real estate. For example, a chain of grocery supermarkets with a rate of return of more than 25% finds it more profitable to rent premises than to invest capital in real estate, which provides only about 10% of income. However, these incentives are still not working in Ukraine. Underdevelopment of the capital market, low level of business culture, lack of reliable long-term relations between tenants and real estate owners are significant obstacles. Additionally, trust in the judicial system remains low, making it difficult to resolve disputes and create a stable legal framework for the real estate market. In such an environment, the idea of delegating real estate management through funds is often perceived as risky, deterring both investors and potential REIT operators. Despite these challenges, attempts to create real estate funds aimed at retail investors are already being observed in Ukraine. This trend is gradually gaining momentum and may develop further as business practices and the legal environment improve. The introduction of such funds could be an important step towards expanding investment opportunities, stimulating the real estate market and increasing the transparency of the financial system. What risks should be taken into account when forming an investment portfolio Formation of an investment portfolio requires taking into account several key factors in addition to the availability of instruments, in particular, price volatility and liquidity of assets. Price volatility is an important indicator of risk: assets with high historical price fluctuations are considered riskier because their value can change significantly in a short time. For investors, this means both the potential for high profits and an increased probability of losses. That is why volatility should be carefully analyzed, especially when choosing assets with different levels of risk. The liquidity of the asset is no less important, because it determines how quickly and without significant loss in value the asset can be sold or bought. Assets with high liquidity, such as stocks of large companies or government bonds, are less risky because they can easily be exchanged for cash. Illiquid assets, such as real estate or shares of small companies, can become a financial burden in the event of an urgent need for funds. High liquidity allows the investor to reduce the risks associated with the impossibility of timely realization of the asset. Therefore, in order to build an effective investment portfolio, one should focus not only on the expected yield and availability of certain instruments, but also analyze risks where volatility and liquidity are important components. A combination of assets with different levels of return and risk makes it possible to form a diversified portfolio, while ensuring the possibility of receiving an expected return. The ideal investment portfolio The ideal investment portfolio is always individual and depends on the needs, priorities and financial capabilities of each investor. For entrepreneurs, the best option is often to invest in their own business, which usually brings the highest return and corresponds to their professional knowledge and beliefs. For other investors, especially those with additional income, a classic approach to asset allocation is appropriate. Such an approach may include: 30% in real estate, which provides stable income and is a relatively low-risk asset; 20-30% in low-risk money market instruments that guarantee liquidity and capital preservation; 20-30% in shares, which allow you to receive more income in the long term; and the remaining funds into high-risk assets, such as cryptocurrencies or startups, for potentially significant returns. How to secure savings It is impossible to predict absolutely all risks in the world of investments, but following a systematic approach to decision-making significantly reduces the probability of losses. The use of proven algorithms based on market analysis, as well as consultations with other experts, allow you to avoid common mistakes. It is also important to respond in time to changes in market conditions and exit investments when necessary to minimize potential losses. Diversification remains the key risk reduction tool. Investing in different asset classes — real estate, shares, bonds, high-risk instruments — allows you to offset losses in one direction with gains in another. Thus, a properly diversified portfolio reduces the risk of significant losses and provides greater stability in achieving financial goals.