The same 1,000 lei, three roads: the mattress, the bank, the stock market

The chart shows inflation year by year since 1991. The first years after 1990 were another world: in 1993 prices rose by 256% on average. Anyone with savings in lei in 1990 watched them melt within a few years. Since 2005 inflation has been far lower, but not zero: the yearly average was 5.1%.

Low, predictable inflation is not the enemy. The National Bank of Romania targets 2.5% a year, give or take a percentage point. What matters is whether your money grows faster or slower than prices. The difference is called the real interest rate.

The rates used are the monthly averages the BNR publishes for new household time deposits in lei, applied month by month. Tax is withheld from interest too (see the rules below), so the real result is a little weaker than the blue line.

How it is measured. INS computes the consumer price index (CPI) from the prices of several hundred goods and services, collected monthly across the country, each weighted by its share of household spending in the household budget survey. The chart shows annual averages: one year's prices against the year before.

Your inflation is not the average. A family spending a lot on food and energy felt more than the 2022 average of 13.8%. One paying a fixed rent felt less.

The real rate is (1 + interest) ÷ (1 + inflation) − 1. A 6% deposit in a year of 8% inflation means a real loss of almost 2%, even though the statement shows a gain.

The reason is called compound interest: a year's gain stays in the account and earns gains of its own. At 5% a year a sum doubles in about 14 years. The early years have time to double several times; the late ones, not at all.

The same mechanism works against you on debt. A debt growing at 30% a year doubles in about 2.6 years. The legal cap on the cost of consumer loans from non-bank lenders is around 34.5% a year. Compound interest works for whoever receives the interest.

What the calculation assumes. Contributions go in at the start of each month; the return is constant and real (after inflation); there are no taxes or costs. Real returns are not constant: the same average with good and bad years in a different order can give different final sums to someone saving gradually.

What return is realistic? For comparison: a lei deposit returned on average −0.2% a year after inflation over the period in the first chart. US shares returned a median of 6.8% a year over 30-year periods since 1871. None of these numbers is a promise about the future.

The falls were real and long. The table shows the largest falls in real terms. Anyone who bought at the 2000 peak waited 153 months to get their starting buying power back.

If you need the money in two years, the stock market is the wrong place for it, however good the average. If you need it in 20, history says something different from fear.

Why America? Because it is the only market with public monthly series, dividends and inflation included, over 150 years: the file kept by Robert Shiller of Yale. But America was the century's most successful large market, which flatters the numbers. The Dimson–Marsh–Staunton yearbook finds that for 1900–2025, equities were the best asset class in all 21 countries with continuous histories. Not all matched America: the developed-markets index, the US included, returned 8.5% a year in nominal dollars, against 9.8% for the US alone.

How it is computed. Prices are monthly averages of daily closes, so falls within a month were deeper than shown here. Dividends are reinvested monthly. Taxes, costs and exchange rates are not included. Last month in the data: September 2026; dividends after June 2026 and the latest US inflation are estimates in Shiller's file.

For someone in Romania, foreign shares carry one more risk: the exchange rate. The leu has weakened against the dollar in some periods and strengthened in others, and that adds to or subtracts from the market's result.

So are ETFs "the best"? There is no best investment for everyone. There are questions that make one suitable for you or not: when you need the money, how much of a fall you can bear to watch, what it costs. ETFs on broad indices answer the last two well: they are diversified and cheap. No product answers the first.

The opposite of an index fund is an actively managed fund, where a manager picks the shares. S&P Dow Jones Indices' SPIVA Europe scorecard, with data to the end of 2025, finds that over ten years 98% of actively managed global-equity funds denominated in euros returned less than the index they are measured against.

What else matters in an ETF: whether it reinvests dividends (accumulating) or pays them out (distributing); where it is domiciled, which changes the tax withheld on foreign dividends; the currency you buy in; how closely it tracks its index (the gap is called tracking difference); and broker fees, which come on top of the fund's cost.

In the European Union, retail investors usually buy ETFs harmonised under the UCITS directive, which sets rules on diversification and on holding assets separately. To buy them you need an account with a broker licensed by the ASF or another EU regulator.