Why Your ‘Risk-Free’ Savings Account Is Riskier Than a Bond ETF

The Austrian obsession with Tagesgeld runs deep. It’s the financial equivalent of a warm blanket, always there, always liquid, always “safe.” But a recent discussion among Vienna’s retail investors revealed a crack in this foundation: during the negative interest rate period, some money market ETFs showed capital losses while Tagesgeld accounts mysteriously stayed at zero. This isn’t the simple story of ETFs being riskier. It’s a story about how both options harbor dangers that only become visible when you look beyond the marketing.

The 2023 Mystery That Started It All

A Reddit user examining the money market ETF A0RNWC noticed something disturbing: the fund’s value had turned negative around 2023. With a Tagesgeldkonto, they reasoned, they would have at least stayed at zero. This observation cuts to the heart of a common misconception, that Tagesgeld is somehow immune to market forces.

What actually happened? During the negative interest rate era (roughly 2014-2022), European banks faced negative deposit rates at the ECB. But Austrian banks didn’t pass these negative rates to retail Tagesgeld customers. Why? According to community members, it would have been terrible PR and potentially legally problematic following relevant Austrian Supreme Court (OGH) rulings.

Money market ETFs, however, invest directly in short-term government and corporate bonds. When interest rates turned negative, these instruments reflected market reality, meaning the ETFs showed actual negative performance. The Tagesgeld account just looked better because the bank absorbed the losses.

The 100,000 Euro Threshold Where Everything Changes

Here’s where the discussion gets genuinely spicy. Multiple contributors pointed out that money market ETFs only become relevant when you’re parking 100,000 euros or more. Below that amount, the difference between 2.66% on an ETF versus 2.3% on Tagesgeld is practically meaningless, “das ist ja alles nix was du da bekommst”, as one commenter bluntly put it.

But cross that 100k line, and the risk profile flips dramatically. Tagesgeld in Austria is protected by Einlagensicherung up to 100,000 euros per bank and per customer. Have 150,000 euros? That extra 50,000 sits unprotected. Want to stay fully insured? You’ll need to split your cash across multiple banks, creating a bureaucratic nightmare of accounts to monitor.

Money market ETFs, and Austrian Bundesschatz (government bonds), don’t have this problem. As one contributor noted, “Über 100k kommt btw. noch hinzu, dass auf Tagesgeld die Einlagensicherung nimmer voll zieht. Das Problem hast du dann beim Geldmarktfonds (aber auch beim Bundesschatz) nicht.”

The Bundesschatz Wildcard

Austria’s own Bundesschatz.at keeps appearing in these discussions as the forgotten middle path. These are short-term government bonds, backed by the full faith and credit of the Austrian state. In theory, they’re only at risk in a sovereign default scenario.

But there’s a catch: liquidity. While Tagesgeld offers instant access and money market ETFs can be sold during trading hours, Bundesschatz requires you to request redemption. In practice, one user reported receiving funds the same day when they requested a payout, making it functionally similar to Tagesgeld. The key difference: if you redeem before maturity, you get a lower interest rate, but with 1-month instruments and automatic reinvestment, this loss is minimal.

The Tax Trap Nobody Mentions

Here’s where Austrian specifics matter. Tagesgeld interest is subject to Kapitalertragssteuer (KESt) of 27.5% (25% plus solidarity surcharge). Banks automatically withhold this, making it painless but invisible.

Money market ETFs complicate things. If the ETF domicile is Ireland (common for UCITS ETFs), you’re dealing with foreign investment funds. While the tax treatment should theoretically be identical, the reporting burden falls on you. And if you accidentally choose a non-EU domiciled ETF? Welcome to the nightmare of foreign tax credits and Austrian Finanzamt paperwork.

One contributor wisely advised: “Schau immer dass Findomizil Irland oder Österreich ist. Das spart dir Probleme. Es gibt Ausnahmen aber als Faustregel empfehlenswert.”

The ETF Security Mirage

ETF proponents love to highlight that ETFs are Sondervermögen, special assets segregated from the broker’s balance sheet. If your broker goes bankrupt, your ETF shares remain yours and can be transferred to another broker.

But this protection has limits. During extreme market stress, money market ETFs can experience liquidity issues. In March 2020, several European money market ETFs traded at discounts to their net asset value because market makers stepped away. Tagesgeld never has this problem, 100,000 euros is 100,000 euros, regardless of market conditions.

Deposit insurance protects your Tagesgeld up to 100,000 euros per bank, but what about amounts above that?

The Performance Illusion

Let’s talk real numbers. The ETF A3DJQJ mentioned in the discussion currently yields 2.66% annually. Top Austrian Tagesgeld accounts are offering around 3.1% for promotional periods, dropping to 1.8-2.3% thereafter.

But performance isn’t just yield. During the 2023 interest rate volatility, money market ETFs with longer-duration holdings experienced price fluctuations of 0.5-1%. For a “safe” investment, that’s enormous. Tagesgeld’s value never fluctuates, what you see is what you get.

The critical insight: money market ETFs aren’t designed for capital preservation. They’re designed for efficient cash management at institutional scale. Retail investors are borrowing a tool built for treasuries managing billions.

When “Risk-Free” Becomes Risky

The real controversy isn’t whether one product is better, it’s that both fail at their supposed purpose in different ways:

• Tagesgeld risks:
  • Inflation risk: Guaranteed loss of purchasing power
  • Concentration risk: Only 100k protected per bank
  • Opportunity cost: Missing out on higher yields elsewhere
  • Bank credit risk: In a systemic crisis, even insured deposits could face delays
• Money market ETF risks:
  • Market risk: Capital losses during rate volatility
  • Liquidity risk: Discounts to NAV during stress
  • Complexity risk: Tax treatment, domicile issues, regulatory changes
  • Counterparty risk: Though minimal, the repo agreements underlying these funds aren’t risk-free

ECB interest rate decisions directly impact both Tagesgeld yields and money market ETF performance, but in different ways.

The Austrian-Specific Conclusion

For residents of Austria, the optimal strategy depends entirely on your cash amount:

• Under 100,000 euros: Stick with Tagesgeld. The simplicity, deposit insurance, and tax convenience outweigh the minimal yield difference. Split across two banks if you approach the limit.
• 100,000-500,000 euros: Consider a hybrid approach. Keep 100k in Tagesgeld for immediate liquidity, then use a combination of Bundesschatz (for state-guaranteed safety) and carefully selected money market ETFs with Irish domicile.
• Over 500,000 euros: Money market ETFs become essential. At this scale, the deposit insurance limitation makes pure Tagesgeld impractical. But diversify across multiple ETFs and consider keeping some allocation to direct government bonds.

The most important takeaway? There is no such thing as a risk-free investment. Tagesgeld’s risk is inflation and opportunity cost. Money market ETFs’ risk is complexity and market volatility. The “safe” choice is simply choosing which risk you prefer to take.

As one contributor summarized: “Der sichere Anteil stabilisiert dein Portfolio und deine Nerven – That’s it.” The safe portion isn’t about maximizing returns, it’s about psychological stability and knowing exactly what risks you’re taking.

The real scandal isn’t that one product is secretly dangerous. It’s that both are marketed as “safe” when they simply hide their risks in different places. Austrian investors deserve to know where their risks actually live.