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The Search For Meaningful Income

Australian investors are struggling to generate income from conservative investments such as bank and term deposits. Placing your hard-earned money into a one-year bank term deposit will only yield 1.3% (blue line). According to the Reserve Bank of Australia’s (RBA’s) data, this is the lowest term deposit rate since the records began in 1981.  Indeed, the current 1.3% term deposit rate is even below Australia’s 1.6% inflation rate for the year to June 2019. For the first time investors appear set to earn less than inflation in these challenging times.

Australian shares with their current dividend yield at 4% should be more appealing to investors (red line). However, the Australian ASX200 share dividend yield comes with the risk of more volatile investment returns. Being a share investor means being subject to the ups and downs of capital gains and losses as well as the benefit of dividend yields.  This is a global predicament for investors. The recent RBA Financial Stability Review highlighted that the extended period of low global interest rates “has encouraged investors to take on more risk, raising the possibility of financial stress if a sharp reversal in asset prices should occur.”  

What does all this mean? Whilst there is never a one size fits all investment approach, in the current market the value of diversification cannot be underestimated.  Having some money set aside in the safe, although low return cash/term deposit market can be coupled with an investment into the sharemarket to enhance returns over the longer term. By ensuring you have funds available when required you can ride out any short-term fluctuations in sharemarkets.

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  1. Brian Dolman on November 6, 2019 at 9:12 am

    I am looking at a company called Skyring in Brisbane offering a 6.95% Fixed Interest Fund initial investment dropping back to 6.55% after 6 months that pays funds into bank account every month, seems like a good investment, just looking for a comment please.

    • The Muirfield Team on November 19, 2019 at 8:46 pm

      Hi Brian

      We are not familiar with Skyring and cannot provide specific advice. However, as a starting point it’s important to remember there is no such thing as a free lunch. If someone is offering you a higher return than say a term deposit, the inherent risks are greater.

      I’m happy to discuss this further if you wish. Our number is 03 5224 2700.

      All the best

      Courtney Robinson

  2. Joe Diffen on December 24, 2019 at 4:45 pm

    Do you have a view about corporate bonds and EFT’S.

    • The Muirfield Team on January 3, 2020 at 9:40 am

      Thanks for your query Joe, at Muirfield we believe a well-diversified portfolio should include fixed interest (including corporate bonds).
      We also include low-cost ETF’s in our portfolio’s. To provide you a more comprehensive breakdown we would need to write an essay therefore we recommend you call the office if you would like more information.

      All the best.

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