# Can anyone make sense of this message from Degiro?



## settlement (28 Feb 2020)

Got this email:


_Our system detected that the amount of your EUR Money Market Funds (MMF) participations has exceeded our compensation limit over the last days.

We remind you that at DEGIRO all non-used money is automatically invested in MMF’s via a standing order. Negative returns, due to market interest rates and fund costs, are only compensated for the first 2500 EUR in MMF holdings.

If you want to avoid negative return in the Money Market Funds, some of the options are the following:_

_*Withdraw your money to your bank account:* if you do not choose to invest your money at this time, you can of course move it to your bank account. When the time is right, you can always deposit your funds back to your DEGIRO account._
_*Invest into other financial products:* although investing is riskier and thus not comparable to an MMF or bank account, it is probably the reason you transferred money to your DEGIRO account. Most of our clients choose to invest in stocks or in Exchange Traded Funds (ETFs). We enable investors to invest commission-free in a large number of ETFs to facilitate the diversification of portfolios. We do not receive payments from ETF providers in any way. Please see the terms and the list of free ETFs here._


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## RedOnion (28 Feb 2020)

You've more than 2,500 in cash, and it's earning a negative interest rate. So you're losing money.


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## settlement (28 Feb 2020)

So they're charging me a negative interest rate? Any idea how I find out the rate?

The reason I have money in my account is to invest but obviously right now I'm not incredibly keen so is my only option to withdraw it and then send it in again the day I decide to invest? It may be a snap decision so I didn't want to have to wait to transfer


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## EmmDee (28 Feb 2020)

My interpretation of it is.....

Free cash in a DeGiro account is swept into money market funds (which is a good thing - it means they aren't holding customer cash balances). At the moment, as with large cash balances, the return on money market funds are negative. However it seems that DeGiro aren't passing on the negative returns to clients as long as the balance is €2,500 or less.

I would guess that you have more than €2,500 sitting on your account and they are asking you to put it elsewhere - they don't want to absorb the negative rates for large deposits.


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## EmmDee (28 Feb 2020)

settlement said:


> So they're charging me a negative interest rate? Any idea how I find out the rate?
> 
> The reason I have money in my account is to invest but obviously right now I'm not incredibly keen so is my only option to withdraw it and then send it in again the day I decide to invest? It may be a snap decision so I didn't want to have to wait to transfer



They aren't charging you a negative rate because they aren't holding your money. They are sweeping it into money funds which have a negative return. Assuming it's EUR, the money funds are probably returning about  -0.5% per annum


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## RedOnion (28 Feb 2020)

There's no way of knowing the rate. It's invested in a highly liquid money market fund. Probably around -0.5% to -0.6% at the moment for Euro.


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## settlement (29 Feb 2020)

Thank you all


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## joe sod (29 Feb 2020)

RedOnion said:


> You've more than 2,500 in cash, and it's earning a negative interest rate. So you're losing money.



I have to smile at this, on the thread "longest bull market in history" I have been arguing that negative interest rates have changed the rules with respect to stock market investing, cash and bonds are no longer safe havens to park capital for long periods. Here we have concrete confirmation of this where now retail investors are being charged negative interest rates on cash deposits. Another aspect not discussed is the fall in value of the euro on international exchanges lately especially against the dollar and sterling, (caused by negative interest rates) that is another big headwind you will need to fight with your euro bonds and cash. Of course falling euro exchange rates are very good for european stocks, I expect this to be reflected when coronavirus panic passes.


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## RedOnion (29 Feb 2020)

joe sod said:


> Here we have concrete confirmation of this where now retail investors are being charged negative interest rates on cash deposits.


We've concrete confirmation that confirmation bias is a real thing.

A retail investor in Ireland, with Euro funds, doesn't need to accept negative rates. Zero, and indeed positive, 'risk free' rates of return are available.

They don't have a 'cash deposit' in this case, since DeGiro isn't a bank and can't legally take deposits. The customer is automatically investing in money market funds as per DeGiro's terms and conditions. DeGiro are simply passing on the returns (which are currently negative) to the customer. If you don't want negative returns, just move the money to your current account. Problem solved.

Retail investors technically have an advantage over the market, in that they don't have to accept negative returns.



joe sod said:


> Another aspect not discussed is the fall in value of the euro on international exchanges lately


Isn't that a different topic? It might be useful if you started a separate thread on this so it doesn't get lost.


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## joe sod (29 Feb 2020)

RedOnion said:


> If you don't want negative returns, just move the money to your current account. Problem solved.


 Yes but this is hard evidence of negative interest rates directly affecting retail investors. The problem is that once you move your newly released capital from your brokerage account to your bank account then that capital wont go back into stocks when the panic ends, you will just wait and wait,  the cash will just sit in your current account, then because stock markets are  "dangerous", that money will burn a hole in your current account, so a new kitchen or a cruise around antartica will beckon (obviously with the ice melting because of global warming it is crucial to experience this, there is always a worthy justification), it will be spent and not re invested. So money that was an investment ends up as discretionary spending


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