GFC fears encourage term deposits but shares are still best
THE team at Yellow Brick Road Ballina fields around half a dozen inquiries a day from people, predominantly retirees, asking what our best term deposit rate is.
Upon further inquiry, it is more often than not revealed that the person enquiring has the bulk of their super and savings in cash because: "I lost a lot in the GFC and want to avoid risk".
This concerns me so much that I recently invited some leading investment experts to Ballina and Byron Bay to deliver a seminar de-bunking some of the commonly understood concepts of risk and investment.
The response was so positive that I thought I would attempt to summarise the key points in this column.
As a case study, we looked at the relative performance of a $10,000 term deposit invested from 1980 to 2013, compared with the same amount invested for the same period in the entire ASX 200 companies (the good, the bad and the insolvent, across a period which included several crashes and crises).
The results, in the graph (at right), speak for themselves.
The key conclusions of our discussion were:
All of us, including most retirees, are investing our super for 20 years plus: matching your investment strategy to your timeframe is critical;
Inflation is the enemy of long term investors;
- Because of inflation, cash simply doesn't work as a long-term investment;
- A well-diversified portfolio of shares should be part of all long term investment strategies; and
- Re-balance your portfolio regularly to manage risk.
If you would like more information on these issues, drop me an email at email@example.com.
* Campbell Korff is the principal of Yellow Brick Road Wealth Management, 135 River St, Ballina.