According to Bloomberg, there’s more than $600b in corporate bonds (including mortgage-backed issuance) outstanding in Australia — that’s around 30%…
Written by Katherine Sadler Published: August 27 2019 Investments
The Australian stock market is around the same level it was in January, the Reserve Bank is expected to cut interest rates again and the property market is slowing.
This hasn’t been an easy time for investors and the next few months are particularly unnerving for people looking to preserve and grow capital to fund their retirement.
More and more financial products are coming onto the market but term deposits, one of the most enduring and simplest forms of investment, remain popular as a place to hold cash.
At a time of great uncertainty, a retiree can buy a TD knowing the return beforehand. Their capital will increase in value, and their cash will be available at maturity.
With terms ranging from 30 days to five years, TDs can be matched to times when expenses will be incurred, enabling the investor to plan with some peace of mind because outgoings are covered.
The investor can tailor a TD strategy by splitting their funds between a series of TDs to take advantage of current market rates while having a rolling supply of cash available as different terms reach maturity.
TDs in a retirement strategy are frequently used to offset other riskier investments that can decline in value, such as shares or property.
They also offset liquidity risk. The funds will be available at maturity, unlike some unit or property-type investments that can be hard to cash in without a ready buyer on the other side of the transaction.
Investors who want to actively manage their money have full control of their TD, choosing terms to suit their needs and ensuring their funds are earning the great interest rates.
Capital preservation and growth are important for people leaving the paid workforce and TDs provide them with security and flexibility.