6.51% return is pretty good today right?

[Tyler Durden]

I'm close to setting up a Ubank account to get the 6.51% interest rate (currently with ING for 5%) and I can't seem to get over how good of a deal this is (or maybe I'm just a newbie/ignorant).

Given the state of the markets today, and the fact that if you were to invest today you'd be hard pressed to find a dividend yield of around 6.5%, wouldn't Ubank be the most attractive prospect??

I mean, this is 6.51% risk free! Yeah I know how taxes and inflation cuts into that, but again, given the possibility of losing your capital in the markets today, 6.51% is pretty damn good right?

Right?!?!? Or am I totally off the mark here, and investing in the market today (and I'm speaking generally) is a no-brainer option better than Ubank?

 

[McLovin]

The return on shares is comprised of capital + income, as opposed to a bank account which is only income. Then there is the tax implications of interest v fully franked dividends.

It's still a good rate though. It wasn't long ago that getting an at call interest rate above the cash rate was virtually unheard of.

 

[Starcraftmazter]

After inflation and tax it usually amounts to less than 1%.

Shares can be a lot more tax effective if held for a year or more (and they actually rise in value : )

What it is good is for preserving the value of your money without (much) risk.

As the cost of food and energy rises much quicker than inflation, even though the value of your money would be preserved, that is not necessarily true for it's purchasing power.


Bit disappointing really.

 

[Calliope]

After inflation and tax it usually amounts to less than 1%.
What it is good is for preserving the value of your money without (much) risk.

Tyler won't make any money out of this, but he won't lose any either.

Reserve Bank board member Warwick McGibbon says the global economy is a "slow-motion train wreck." Perhaps Tyler's flight to safety is a wise move before it speeds up.

 

[tothemax6]

Tyler won't make any money out of this, but he won't lose any either.

Exactly how I see it. Interest is not there to make you money, government created inflation and tax ensure that. However, in Australia, interest currently protects your money from inflation.

 

[Intrinsic Value]

Exactly how I see it. Interest is not there to make you money, government created inflation and tax ensure that. However, in Australia, interest currently protects your money from inflation.

There are still good share investments out there if you do your homework.

Long term I believe if you invest in good businesses you will do much better than 6.51 percent.

But if you aren't prepared to do your homework and take an active role in your investments I think you would be better of doing what you are doing.

I have certainly done much much better with my investments but the majority of my gains were from shares I bought last year which I sold off recently and have been slowly buying back in to companies that look good to me and are trading at significant MOS.

 

[Julia]

Shares can be a lot more tax effective if held for a year or more (and they actually rise in value : )

No guarantee of them rising in value. In the present and probably forthcoming global mess, they're more likely to fall in value, unless you have the skills to avoid this.
(viz Warwick McKibbin's remarks about the slowly unfolding train wreck.)

There's a lot to be said, imo, for the peace of mind cash offers in uncertain times.

 

[tothemax6]

There are still good share investments out there if you do your homework.
Long term I believe if you invest in good businesses you will do much better than 6.51 percent.
But if you aren't prepared to do your homework and take an active role in your investments I think you would be better of doing what you are doing.
I have certainly done much much better with my investments but the majority of my gains were from shares I bought last year which I sold off recently and have been slowly buying back in to companies that look good to me and are trading at significant MOS.

Agreed, I just think there is more bad news to come. US is not going to recover, and we are still waiting for the inevitable crash in the Chinese fixed asset market.

 

[tech/a]

There will ALWAYS be uncertain times.
And when you have no cash-flow as a retiree or all of your income is committed the safety of interest bearing accounts is attractive.

BUT
Adversity begets OPPORTUNITY.
Seriously everyone MUST LEARN how to control RISK if supplementing or growing your wealth is to occur.

Mediocrity will breed mediocre result.
Over 70 % of the world population is living in poverty and of the rest 97 % live in mediocrity.

Of those above very few have the OPORTUNITY you and I have---- we live in a developed country. What a tragedy in ones life to settle for mediocrity and not take advantage of opportunity when we HAVE the chances few could even dream of!!!!!

Don't let this life slide by

 

[Logique]

I'm close to setting up a Ubank account to get the 6.51% interest rate (currently with ING for 5%) and I can't seem to get over how good of a deal this is (or maybe I'm just a newbie/ignorant)...

Isn't that rate only if you set up a regular savings plan ($200/mth), otherwise it defaults to 6.01%? In which case you can do better. It's right there on Ubank's website. Not being critical, just trying to help.

 

[Tyler Durden]

Shares can be a lot more tax effective if held for a year or more (and they actually rise in value : )

I'm not so sure about this. I bought TAH pre-GFC at $15. Then post GFC it floated around $7. Now after the de-merger, it's around $3.

I usually tell people - what goes up, must come down

Exactly how I see it. Interest is not there to make you money, government created inflation and tax ensure that. However, in Australia, interest currently protects your money from inflation.

I'm not sure I understand the bolded part, care to explain?

There will ALWAYS be uncertain times.
And when you have no cash-flow as a retiree or all of your income is committed the safety of interest bearing accounts is attractive.

BUT
Adversity begets OPPORTUNITY.
Seriously everyone MUST LEARN how to control RISK if supplementing or growing your wealth is to occur.

Mediocrity will breed mediocre result.
Over 70 % of the world population is living in poverty and of the rest 97 % live in mediocrity.

Of those above very few have the OPORTUNITY you and I have---- we live in a developed country. What a tragedy in ones life to settle for mediocrity and not take advantage of opportunity when we HAVE the chances few could even dream of!!!!!

Don't let this life slide by

I know, but I try to keep an open perspective about things. I'm sure out of 10 people who said that, a few would've failed and thought it would've been better to just sit tight.

Isn't that rate only if you set up a regular savings plan ($200/mth), otherwise it defaults to 6.01%? In which case you can do better. It's right there on Ubank's website. Not being critical, just trying to help.

Yeah, I've got no problems setting up the plan.

 

[tech/a]

Yeh your absolutely right there are 1000s of people who have tried and failed I was one.
But those who have tried again and succeeded make the few % who have given it their best shot.
It's those who are frozen with fear of failure who are doomed to mediocrity.

Enough said

 

[So_Cynical]

I'm close to setting up a Ubank account to get the 6.51% interest rate (currently with ING for 5%) and I can't seem to get over how good of a deal this is (or maybe I'm just a newbie/ignorant).

Given the state of the markets today, and the fact that if you were to invest today you'd be hard pressed to find a dividend yield of around 6.5%,

Just of the top of my head...and straight outa my portfolio.

• IMFG yielding around 9%
• APN 9.1%
• CFX 7%
• ALZ 7.4%

Jezzzzz even HDF is yielding 6.3% with lots of upside and what 200 million in the bank.

Yep really hard to find any decent yield in this market.

 

[Wysiwyg]

Just of the top of my head...and straight outa my portfolio.

APN 9.1%

Gee whiz. Fantastic if you like to sell at a loss or worse, hold as the price depreciates every week.

 

[Tyler Durden]

Just of the top of my head...and straight outa my portfolio.

• IMFG yielding around 9%
• APN 9.1%
• CFX 7%
• ALZ 7.4%

Jezzzzz even HDF is yielding 6.3% with lots of upside and what 200 million in the bank.

Yep really hard to find any decent yield in this market.

Wow, all those have fallen fairly significantly. I can't see how getting into those would be equal to or better than Ubank at 6.51%.

 

[So_Cynical]

Gee whiz. Fantastic if you like to sell at a loss or worse, hold as the price depreciates every week.

Yield is what it is...and we are talking about the yield at current SP, fair chance the yield will hold too.

 

[Tyler Durden]

Yield is what it is...and we are talking about the yield at current SP, fair chance the yield will hold too.

That's true, but I also referred to the degree of risk. Maybe it's a game of pick your poison? Keep capital and earn 6.51% but open to inflation and tax, or lose capital and earn 9%...

 

[Julia]

Just of the top of my head...and straight outa my portfolio.

• IMFG yielding around 9%
• APN 9.1%
• CFX 7%
• ALZ 7.4%

Jezzzzz even HDF is yielding 6.3% with lots of upside and what 200 million in the bank.

Yep really hard to find any decent yield in this market.

I can't believe you're ignoring what is happening with the capital!! This is the most important part imo, i.e. protecting your capital.

Just taking APN as an example, Etrade has the yield at 8.5% with only 28% franking.
Presumably you are grossing up the yield when you quote 9.1%.

If we assume a capital investment about a year ago of $10,000 when the SP was around $2.20, and if we take the last close at $1.30, that's a reduction in your capital ofabout $4000!!
Add to that your dividend of 9.1% and you are still down around $3500 for the year.

It's one of the most basic errors made to focus on yield without giving proper consideration to what's happening to the capital.

I'm sure you're smart enough to figure this out, Tyler.

 

[Tyler Durden]

I can't believe you're ignoring what is happening with the capital!! This is the most important part imo, i.e. protecting your capital.

Just taking APN as an example, Etrade has the yield at 8.5% with only 28% franking.
Presumably you are grossing up the yield when you quote 9.1%.

If we assume a capital investment about a year ago of $10,000 when the SP was around $2.20, and if we take the last close at $1.30, that's a reduction in your capital ofabout $4000!!
Add to that your dividend of 9.1% and you are still down around $3500 for the year.

It's one of the most basic errors made to focus on yield without giving proper consideration to what's happening to the capital.

I'm sure you're smart enough to figure this out, Tyler.

 

[So_Cynical]

I can't believe you're ignoring what is happening with the capital!! This is the most important part imo, i.e. protecting your capital.

Just taking APN as an example, Etrade has the yield at 8.5% with only 28% franking.
Presumably you are grossing up the yield when you quote 9.1%.

If we assume a capital investment about a year ago of $10,000 when the SP was around $2.20, and if we take the last close at $1.30, that's a reduction in your capital ofabout $4000!!
Add to that your dividend of 9.1% and you are still down around $3500 for the year.

It's one of the most basic errors made to focus on yield without giving proper consideration to what's happening to the capital.

I'm sure you're smart enough to figure this out, Tyler.

Yeh but were are not talking about a year ago current SP is about $1.30 the last 2 dividends add up to 12 CPS (net) so if we factor that forward we have a yield of 9.1% (approximately) from this point forward.

---------------------------

Julia the stock market is all about capitol risk...that's what is at the heart of the market, that risk has to be managed and i don't think keeping your money in the bank is a valid stock market risk minimization strategy.

Wow, all those have fallen fairly significantly. I can't see how getting into those would be equal to or better than Ubank at 6.51%.

Then perhaps you had better reassess your continued participation in the market...its simply not for everyone.

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ill put them in a portfolio and we will see how they perform against your 6.5%