Cash flow in investments means the rhythm at which the money generated by an investment becomes available to the investor. In other words, what matters is not only how much money an investment can earn over a given period, but also when this money can be used. One investment product will provide for interest payments every month, in another case interest will be accrued daily, and in yet another you will receive the entire result of the investment only at the end of the term. Understanding the specifics of each situation will help you make the decision that suits you best.

In brief:

• Cash flow in investments describes not only how much an investment earns, but also when the money earned becomes available.

• Investments with the same annual return can have a completely different rhythm of receiving money.

• The three most common options are: interest can be received every month, accrued every day, or the entire amount can be received at the end of the term.

• Accrued money and available money are not always the same thing. It depends on the payment frequency and terms of the specific investment.

• On the TWINO platform, investments in loans provide for receiving interest every month, whereas in the case of FLEXI the interest on the investment is accrued every day, and the investor can request a partial or full withdrawal of funds.

What is cash flow in everyday life?

Cash flow in everyday life is easy to understand if we imagine an example involving a salary and monthly expenses. The salary arrives in the account once a month, but bills, grocery purchases, transport costs and other payments are needed on various dates.

The problem is not always the amount of money; it can also be a mismatch of rhythms.

If the entire salary arrives on one day, but the largest bill only has to be paid three weeks later, the money is at your disposal during this time. If, on the other hand, that particular amount were only available after three weeks, the situation would already be quite different.

It is similar with investments. An investment may have earned a certain amount on paper, but this does not yet mean that this money is already available for use.

That is why, when thinking about an investment, it is worth understanding the difference between two different things: how much money has been accrued and how much is currently available.

What are the most common cash flow rhythms in investments?

Depending on the answer to the question that matters to many investors, namely when the interest arrives, investments can be divided in a simplified way into three groups: the money is received at the end of the term, every month, or accrued every day.

To understand the difference, let us look at a hypothetical example in which an investment generates 120 euros of income over a year. The total amount is the same in all three scenarios; only the moment when the money reaches the investor differs.

1. Everything is received at the end of the term

In this case, the 120 euros are accrued, but the investor does not receive them until the end of the specified term.

At the end of the year, 120 euros of income become available. Until then, the investor has the investment and its accrued result, but the money has not reached their hands.

Such a rhythm may be logical for someone who does not need that particular money until the end of the investment period.

2. Interest is received every month

If those same 120 euros were divided into 12 equal monthly payments, the investor would receive 10 euros each month.

The total annual result in the hypothetical example is still 120 euros. What changes is not the total amount, but the time when the money reaches the investor.

Monthly income from investments does not remain in the investment until the end of the term, but becomes available regularly.

On the TWINO platform, this option is offered by loan-backed securities, which provide for receiving interest every month.

3. Income is accrued every day

In the third scenario, the annual income is calculated and accrued every day. In the hypothetical 120 euro example, this would mean approximately 0.33 euros per day, if for the sake of simplicity we use 365 days in a year.

What is important is that daily accrual in itself does not mean a higher annual return. It means that the income is reflected earlier and more frequently.

In the case of TWINO FLEXI, the interest on the investment is accrued every day, and the investor can request a partial or full withdrawal of funds in accordance with the product terms. FLEXI offers a fixed 6% annual return in accordance with the product terms.

It is important to remember that FLEXI is not a bank deposit and is not covered by state guarantees. The investment is exposed to investment risks, including credit risk and liquidity risk.

How do accrued money and available money differ?

Accrued money is the amount that has already arisen in accordance with the terms of the investment, whereas available money is the amount that the investor can use or withdraw at that particular moment.

For example, if an investment pays interest once a month, the interest will be accrued up to the payment date, but will not yet be transferred to the investor. In an investment where income is accrued every day and is available in accordance with the product's withdrawal terms, the difference between accrued and available will be far smaller.

In the case of FLEXI, interest is accrued every day, and the product itself is designed with the possibility of flexible access.

In loan-backed securities investments, on the other hand, interest payments are received in accordance with the payment schedule of the specific security.

When is cash flow more important than the return?

Neither of these options is in itself better or worse. The question is about when the investor will need the available money.

For example, for someone who needs regular income from investments for everyday needs, monthly payments may be more significant than the possibility of receiving the entire amount after several months.

For someone who is saving ten years ahead and does not plan to use the invested money during this time, the frequency of receiving payments will be less relevant.

Here it would also be appropriate to mention the question of idle money. If, after an investment payment, the money arrives in the account and is not reinvested, it generates no income at all. In such situations, when the money will not be needed in the near future, it might be worth considering a more efficient approach to using it, for example a solution that provides for reinvesting the interest earned. Read more about how idle periods and other similar situations affect the final result in the article on the most common investing mistakes.

You will find more information about the options for investing spare cash in the article about where to park idle cash in Europe.

In conclusion

When assessing an investment, people tend to focus on a single figure, namely the annual return. However, it is equally important to understand when the money reaches your hands.

So next time, when evaluating a potential investment, ask yourself not only how much it will earn, but also whether money that arrives regularly or money that keeps growing is more important to me.

If you are interested in taking a closer look at a solution that emphasises flexibility and daily interest accrual, you will learn more about TWINO FLEXI on the product page. Before investing, familiarise yourself carefully with all the terms and risks.

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This material is for informational purposes and is not individual investment advice.