Major Banks' Retail Deposit Rates. Time to close your online "saver"
Posted Aug 10, 2019, 1:50 AM UTC
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Lol tough time to be a saver. Being punished tremendously
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RAMS bonus saver has 2.55% and ING savings maximiser 2.30%.
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UBank is 2.41%
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Bank of Queensland Fast Track Starter Account 2.5% (for 14 to 24 year olds 3.5% for first 10K)
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There's no point keeping much money in cash. Just throw it in high dividend paying ETFs eg simply signing up for Commsec Pocket and buying "Aussie dividends" can give you that. Then you get 6% dividend yields plus franking credits.
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What about the capital risk though ?
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You can diversify into conservative ETFs with more bonds to reduce capital risk but the yields will be lower than the high dividend ETFs of course. That's the tradeoff you make. An example of a conservative ETF is VDCO.
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Thank you, will look into it 😊
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Just remember with CommSec pocket you can only buy the seven ETFs they choose. This includes the "Aussie dividends" ETFs which invests in SYI.
To invest in VDCO you'll need to set up another account. Another option is to simply keep a portion in cash rather than VDCO. So have say half in "Aussie dividends" ETF and half in cash. Then if eg the market crashes by 50% then your portfolio only goes down by 25%. But it happens the other way around as well. If the market goes up you miss out.
Generally they recommend when you're young you should take more risk and as you get older you reduce risk, so if you're young you can go all in aussie dividend ETFs and as you get older you increase the proportion of cash you hold.
Also look at the other six ETFs that commsec pocket has. They are all good. It is good to diversify outside Australia.
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Still tail risks. It's not a risk of losing 10% capital it's the risk of losing 40.
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VDCO will still reduce any losses.
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I love shitting on Boomers as much as the next person, but god damn imagine paying off a mortgage at 15% interest rates and then retiring and living off 1.5% term deposits. Ouch.
I would imagine the housing prices were relatively lower to compensate for the higher interest rates (assumption: mortgage affordability is expected to remain similar in both time periods and affordability is a function of the amount of debt and the interest rate).
As interest rates fall, borrowers can afford to borrow larger amounts which shifts the demand curve.
My point is, sometimes it's all relative.
Inflation was 10%+ in those times, and house prices were ~3 times wages, now it's ~7. Boomers were the ones in charge to get us to record low interest rates so I wouldn't feel too sorry for them.