![]() Investors buying bonds can expect to receive full repayment of their principal if they hold it until maturity, as well as steady regular interest payments until then (similar to a term deposit).Īs such, bonds are generally considered a lower-risk type of investment than shares, which can’t offer any expectations to investors of either full repayment or a steady income stream and which are usually more prone to market volatility. In everyday financial language they’re referred to as bonds.īonds are securities issued by governments or companies that they use to borrow money. Investors wanting to explore other ways to invest their cash, outside of vehicles such as fixed term deposit accounts, may be interested in considering fixed interest securities. Worse still, after taking high inflation levels into account, real cash returns have been negative for some time. That’s lower than any other major asset class. ![]() Firstly, a decade of record-low interest rates has meant that cash as an asset class has delivered an average annualised income return of just 1.9 per cent since 2012. Yet, cash does have inherent investment risks. As noted above, cash in a savings account is also liquid – you can generally get your hands on it quickly and easily.įurthermore, cash savings up to $250,000 per account holder (including SMSF trustees) on deposit with an Australian authorised deposit-taking institution are guaranteed by the Commonwealth in the event the institution fails. It’s not prone to daily market volatility like shares are. There is a common misconception that cash is a risk-free asset. ![]() It’s generally put there for periods ranging from six months to anywhere up to five years to earn a higher return than a savings account would earn if the cash was retained over the same period. On the other hand, cash held in term deposit accounts can readily be classified as an investment. These are typically ordinary savings accounts providing people (and organisations) with quick access to their money.Ī further $1 trillion is in non-transaction accounts – accounts such as term deposits, where you receive a fixed income return for effectively locking your money away for a set period of time.įor the most part, cash held in savings accounts is used for general living and discretionary expenses – to pay for mortgages, rent, food, and other everyday costs. Separate data from the Reserve Bank of Australia shows that, of the total, roughly $1.6 trillion is being held in transaction accounts. And it’s also the amount of money – according to Australian Prudential Regulation Authority data from January 2023 – that’s being held in millions of deposit accounts provided by Australian banks and other authorised deposit-taking institutions. That's why many investors are shifting to fixed interest securities.īy any measurement, $2.8 trillion is a lot of money.Įxpressed another way, it’s $2,800 billion. Cash in a deposit account doesn't necessarily equate to safety.
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