At the moment the interest rate you’re likely to get on a cash account or term deposit is around 4 to 5%.  These rates are ok but not great.  Unfortunately, financial markets are  predicting that these rates are likely to go down even further in the near term.  That is not  good news if you are sitting on a lot of cash and term deposit investments.

Investors who have stuck with some of Australia’s best known shares are enjoying grossed up income of around 10%!  That’s double the rate of return on cash and term deposits!

Morningstar senior equities analyst James Cooper has a positive outlook for dividends.  ‘Banks are well-capitalised so the risk of dividends going backwards is unlikely’ he says.

Australian Unity Investments head David Bryant says now is not a good time to be over-invested in cash products. ‘Falling interest rates and inflation combine to reduce the value of capital and income exactly what investors are trying to avoid’ he says.

Please note, the risk factor is higher with shares that cash.  Any repeat of the global financial crisis might see shares and dividends tumble.  Given this, shares need to form part of a diversified investment portfolio. 

Source: Herald Sun Monday September 24 – Shares crush cash in bank

General Advice Warning – This article contains general information only. It does not take into account your objectives, financial situation or needs. Please consider the appropriateness of the information in light of your personal circumstances.