Where should we invest our cash?

The official cash rate is sitting at a record low 2 per cent. Many economists are expecting this interest rate to be cut further by the end of this year. So where should we invest our cash to get a better return?

1. Bank Deposits.

Bank deposits come with a government guarantee of up to $250,000. Approximately five years ago term deposits were paying around 6 per cent per annum. Today term deposits are paying less than 3 per cent with most around 2.5 per cent.

2. Pay off Debt.

If you have a mortgage or debt, particularly credit card debt, using your cash to reduce the debt can be an excellent strategy, so long as you don’t go out and increase your debt levels to their previous high. Many people have a false sense of financial security when they pay off their credit card debt in particular and go out spending again. A more successful strategy for people with these tendencies is to reduce the credit card limit down to a more manageable limit immediately after they have paid down their debt.

3. Share investment.

Some stocks are more volatile than others. That is, in a financial recession or financial crisis all shares go down but some so down by a greater percentage than others. For example Macquarie Bank shares declined in value at a greater percentage rate than say Commonwealth Bank. On the other hand in good times the converse is likely to happen.

Many companies in our ASX200 index have very strong Balance Sheet. This means they are well placed to weather any financial storm. The four major banks of Australia in particular are noted among the 22 best banks in the world.

The dividend yield from such stock is more than double what term deposits are paying and they have additional tax benefits.

4. Consider investing your cash in your superannuation fund.

If you are retired or aged over 65 and working you could consider investing cash in your Superannuation fund. If the Superannuation fund is in pension stage then the interest earned on the cash will not be subject to income tax.

Should you require assistance with your investments please contact Peter Quinn by submitting an online enquiry or calling us on +61 2 9580 9166 to book an obligation free appointment.

The information in this document does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. It is important that your personal circumstances are taken into account before making any financial decision and it is recommended that you seek assistance from your financial adviser.