Where are you parking your cash?

[MovingAverage]

Spoke to a few banks today about parking a chunk of cash in a 6-12 mth term deposit...how bloody depressing. Curious to hear what opinions you might be considering for your cash in relation to chasing a “reasonable” interest rate?

 

[fergee]

Spoke to a few banks today about parking a chunk of cash in a 6-12 mth term deposit...how bloody depressing. Curious to hear what opinions you might be considering for your cash in relation to chasing a “reasonable” interest rate?

Here in Japan a lot of people keep their money in a safe at home as the interest rates are so low its barely worth having it in the bank once you factor in the extremely high banking fees and a lack of trust in the regional banks.

 

[Dona Ferentes]

Curious to hear what opinions you might be considering for your cash in relation to chasing a “reasonable” interest rate?

Anything in an ADI that has a + in front of it?

 

[Zaxon]

Curious to hear what opinions you might be considering for your cash in relation to chasing a “reasonable” interest rate?

We keep our cash in a High Interest Savings Account - an account, often from your regular bank, that may have some "hoops" attached to it. Typical hoops are: depositing your wage, doing x number of CC transactions, etc.

 

[aus_trader]

I am keeping the bulk of the % allocated to cash in a HISA same as @Zaxon, since backed by the Government guarantee for deposits in Australia. Also got a small % (~5%) in a Rate Setter account that offers higher interest rate but you need to be comfortable with not having a bank guarantee etc on the principal amount on that, although they do have a Provision Fund that may provide some safety.

 

[sptrawler]

I'm in a term deposit, but will be re alocating more to LIC's and ETF's, when it matures in June. Also might give ratesetters a whirl.
What's the worst that can happen? I end up on a pension.

 

[aus_trader]

I'm in a term deposit, but will be re alocating more to LIC's and ETF's, when it matures in June. Also might give ratesetters a whirl.
What's the worst that can happen? I end up on a pension.

I think you are managing your money well sptrawler, from what I have seen from your posts.

Whatever you do keep doing the same and continue being cautious, because the Government Pension in it's current form is not guaranteed into the future unlike the 250k for Bank Deposits. I think a small % in Rate Setter is OK but be very vary of any privately managed firms asking you to invest with them (remember Storm Financial etc) or any Farmland/Wine/Managed Real Estate (Resorts etc) schemes. You've worked hard to be Self Funded, you don't want to lose your nest egg and rely on unpredictable Government handouts in the Golden years.

 

[Belli]

Don't have "spare" cash. Any in excess of my annual expenses (on a rolling 12 month basis) is placed in the share market. Apart from SOL, no direct shares. Invest only through LICs and ETFs.

 

[againsthegrain]

the 250k bank guarantee is only guaranteed until those funds are available, its like musical chairs if something was to happen there wouldn't be enough to pay every single person out

 

[mangojoe]

What do you think of parking money in bond etfs? E.g. iShares Ultrashort Bond UCITS (not sure though if available in AUD). It has a TER of 0.09%
I could not find a history of dividend payouts though.

 

[qldfrog]

I somehow and probably mistakenly believe that if a crash happen, money eill be safer under a chess holding than on a bank account
I see bank accounts frozen whereas you could still trade your etfs or at least not seized by gov

 

[Dona Ferentes]

I thought there was another version of this, not so long ago:
https://www.aussiestockforums.com/threads/vanguard-etfs-for-dividends.35125/

Seems to me the responses are usually well meaning but could be more focused if initial outline of aims, timeline, attitude to risk, amount of the stake, etc are mentioned.

Only thing we can all agree on: even with $1 million, it's likely there won't be enough to live on. Get 2% as a typical return, and that's $20,000pa. No wonder investors are pushing out the risk curve!

 

[sptrawler]

I somehow and probably mistakenly believe that if a crash happen, money eill be safer under a chess holding than on a bank account
I see bank accounts frozen whereas you could still trade your etfs or at least not seized by gov

I personally think if another major crash happens, due to the fact Australia hasn't joined the quantitive easing band wagon, there will still be a degree of confidence in the integrity of the $A and as happened last time there will be a rush to it.
The biggest problem I see ATM, is the lack of confidence in Countries underlying currency valuations and this is one of the reasons the U.K left the EU IMO.
There hasn't been any structural changes in a lot of the Countries, that were 'bailed out', yet there currency hasn't weakened.
Therefore I don't see there being a problem with the $A, or our economy collapsing as the more people in the World the more materials required, just the change over to renewables, EV's etc will require a massive amount of materials.
More the issue for Australia IMO, is the steady decline in living standards, being brought about by the lack of technically based work be that physical or mental.
Just my opinion.

 

[aus_trader]

I somehow and probably mistakenly believe that if a crash happen, money eill be safer under a chess holding than on a bank account
I see bank accounts frozen whereas you could still trade your etfs or at least not seized by gov

You have brought up a very interesting point qldfrog. That's what I initially thought also, that whatever cash in your brokerage account should be safe in a collapse.

But I think if you really look into the details of the brokerage account cash holding, it is actually held in a bank, and there lies the same risk as any other bank held deposit. For example CMC markets brokerage accounts sends the excess cash in its brokerage account into a Bankwest interest saver account.

 

[aus_trader]

I personally think if another major crash happens, due to the fact Australia hasn't joined the quantitive easing band wagon, there will still be a degree of confidence in the integrity of the $A and as happened last time there will be a rush to it.
The biggest problem I see ATM, is the lack of confidence in Countries underlying currency valuations and this is one of the reasons the U.K left the EU IMO.
There hasn't been any structural changes in a lot of the Countries, that were 'bailed out', yet there currency hasn't weakened.
Therefore I don't see there being a problem with the $A, or our economy collapsing as the more people in the World the more materials required, just the change over to renewables, EV's etc will require a massive amount of materials.
More the issue for Australia IMO, is the steady decline in living standards, being brought about by the lack of technically based work be that physical or mental.
Just my opinion.

I generally agree with the bulk of your comments but I think you may be a bit biased in your opinion of Aussie Dollar. I think they have joined the band wagon and continue to cut rates down to zero and perhaps may go into the -ve following the rest of the developed world. If that wasn't the case our $A would be at either parity or higher than the other developed world currencies such as the $US, Euro etc, not down in a ditch as it stands:

 

[aus_trader]

the 250k bank guarantee is only guaranteed until those funds are available, its like musical chairs if something was to happen there wouldn't be enough to pay every single person out

I could be wrong, but I think if your money is held in a major financial institution then the Government may step into bailing them out in collapse scenario as they don't want the four pillars to tumble. So in that case the Government may print the required money to shore up those banks and in the process may protect the smallish depositors who have up to 250k.

This is what I understand by the bank Guarantee and therefore may not apply to non-Aussie banks and international entities, as the Aussie Government may not come to the rescue of every single bank under the sun that goes under or has to take a significant cut to their savings/deposits should they find themselves in a credit defaulting tornado. For example when US banks such as Lehman Bros, Freddi & Fannie started defaulting during GFC, credit froze around the world and banks went into turmoil not even lending to each other.

 

[sptrawler]

You have brought up a very interesting point qldfrog. That's what I initially thought also, that whatever cash in your brokerage account should be safe in a collapse.

But I think if you really look into the details of the brokerage account cash holding, it is actually held in a bank, and there lies the same risk as any other bank held deposit. For example CMC markets brokerage accounts sends the excess cash in its brokerage account into a Bankwest interest saver account.

I would think the money would have to be held in a trust account, if it wasn't held in a bank account, because they in reality are holding YOUR money and they may not have a banking license. In reality you are just giving them permission, to withdraw funds to purchase shares, that you requested in your name. Just my thoughts.

 

[sptrawler]

I generally agree with the bulk of your comments but I think you may be a bit biased in your opinion of Aussie Dollar. I think they have joined the band wagon and continue to cut rates down to zero and perhaps may go into the -ve following the rest of the developed world. If that wasn't the case our $A would be at either parity or higher than the other developed world currencies such as the $US, Euro etc, not down in a ditch as it stands:

That is true, the interest rates also have a lot to do with it, as many things do. But the EU has a huge problem due to single currency, no one has addressed it yet, but IMO the problem is still growing. I think there is a big difference, between cutting interest rates to devalue the currency and reduce inward flows.
As opposed to constantly inventing more currency, valued on the productive component eg Germany, to prop up other Countries who are basket cases. Sooner or later, there has to be a re valution to reflect the whole not just the best performing sector.
Just my musings

 

[Smurf1976]

Small banks have an aspect that if they did fail then government could actually afford to make good on the deposit guarantee.

If someone like Mystate goes broke well then that's a minor adjustment to the federal budget to pay out the depositors. If CBA, NAB etc went bust then in practice it's going to be rather hard for government to come up with the money at least in a prompt manner.

Also companies like BHP aren't going to become worthless in a hurry. Even in a major crash their value isn't going to zero at least not overnight. You might find you can't sell the shares or at least not for a decent price but there's still a real business there, there's still real physical assets that can't possibly simply disappear into thin air (unlike financial companies where that is indeed possible), and your share of it will have value at some point.

 

[aus_trader]

That is true, the interest rates also have a lot to do with it, as many things do. But the EU has a huge problem due to single currency, no one has addressed it yet, but IMO the problem is still growing. I think there is a big difference, between cutting interest rates to devalue the currency and reduce inward flows.
As opposed to constantly inventing more currency, valued on the productive component eg Germany, to prop up other Countries who are basket cases. Sooner or later, there has to be a re valution to reflect the whole not just the best performing sector.
Just my musings

Agree, I think they are higher up the risk curve than us.