Alternatives to term deposits - Aussie Stock Forums

Results 1 to 9 of 9
  1. #1

    Default Alternatives to term deposits

    Virtually all the investments in our SMSF are term deposits and we are considering alternatives for yield as the term deposits start to mature. We hate the volatility of the share market so are looking at corporate debt, unlisted property trusts, and mortgage funds. We are talking to FIIG about corporate bonds but we are interested in opinions on unlisted property trusts and mortgage funds given the problems experienced during the GFC. Any comments on the following: Charter Hall Direct Property Fund, Cromwell Ipswich City Heart Trust, and La Trobe Pooled Mortgage Fund?

  2. #2

    Default Re: Alternatives to term deposits

    The lowest risk thing for you to do is buy a share in one of the major banks - close your eyes and accept the 10% return after franking and treat any capital gain as a bonus.

    Volatility is only an issue if you choose to watch the daily ups and downs and think it matters in the long run. As an exercise, why not do some research on what your total return would be if you had of bought CBA shares on July 1 any year since 2000 (share price increase / decrease plus franked dividends received).

  3. #3
    Pocket Calculator Operator tinhat's Avatar
    Join Date
    May 2009

    Default Re: Alternatives to term deposits

    You may not get the answer you want on a stock market forum as the bias from a lot of members is going to be towards shares.

    In the depths of the bear market of late 2011 I had similar thoughts to you. I looked around at what bonds and hybrids were on offer at the time. Woolworths had a hybrid offering which started out with about an 8% yield.

    At the end of the day however, I couldn't find a case to sell my WOW shares for their hybrids or sell my bank shares for theirs either. Firstly, with bonds, hybrids there is no franking credit. For a SMSF in pension phase that's a 30% difference on your return right there. Secondly, hybrids seem to have just as much risk and uncertainty of return as shares without any of the upside. What is the guarantee on the yield of the hybrid? It is not fixed. If you need to sell in a hurry on the secondary market there is no guarantee of what price you will get. As for bonds, what is your low yielding bond going to be worth on the secondary market if interest rates go up through the business cycle?

    IMHO bank shares are fully priced at the moment given that there is not a great outlook for earnings growth over the next couple of years. Yet, they still represent a better grossed-up return that their hybrids in my assessment. As for risk to capital, well, keep a couple of years pension income as cash and don't worry about the "volatility". There is no volatility in the dividends! I don't have any trouble sleeping at night with one third of the SMSF total assets invested in the major banks shares (25% in CBA alone). But you have to sleep at night too. Some time ago in another post I did some analysis of the return on CBA shares. Even if you had purchased at the height of the boom in 2007, you would be well ahead on the dividends since then.

    You might find this video of interest. It sums up my views as well:

  4. #4

    Default Re: Alternatives to term deposits

    Read the Storm Financial thread.

  5. #5
    Hatchet Moderator doctorj's Avatar
    Join Date
    Jan 2005

    Default Re: Alternatives to term deposits

    FYI - my apologies for dragging this thread off topic.

    The discussion about the merits of aussie banks has been split off and can now be found here:http://www.aussiestockforums.com/for...ad.php?t=25412

  6. #6

    Default Re: Alternatives to term deposits

    Quote Originally Posted by manning45 View Post
    We hate the volatility of the share market
    Why hate the share market - it does what it does?

    I believe a diversified portfolio should include a mix of cash, fixed interest and shares.

    Also unlisted property trusts and mortgage funds are higher risk investments which I don't consider as fixed interest investments.

    Andrew Newman - Financial Adviser

  7. #7

    Default Re: Alternatives to term deposits

    When the current Term Deposit matures for my SMSF at the end of the year im looking to utilise one of the newly listed cash/Bond/fixed interest ETF,s that have listed on the ASX, all are pretty new but look like a very good alternative to Term Deposits and maybe safer than other income products like preference shares, hybrids, convertible notes etc, spoke with State Street about there products and they do sound a much better option than term deposits, thinly traded at present as they are so new but supported in the market so there is always a bid/ask spread and they pay distributions every 3 months

    Here’s a list of whats available and the ASX code plus a link to info on the State Street Bond fund (BOND) which is what I was looking at


    Australian High Interest Cash ETF Australian Cash AAA
    iShares UBS Composite Bond Index Fund ETF UBS Composite Bond Index IAF
    iShares UBS Government Inflation Index Fund ETF UBS Government Inflation Index ILB
    iShares UBS Treasury Index Fund ETF UBS Treasury Index IGB
    Russell Australian Government Bond ETF Australian Government Bonds RGB
    Russell Australian Semi-Government Bond ETF Australian Semi-Government Bonds RSM
    Russell Australian Select Corporate Bond ETF Australian Corporate Bonds RCB
    SPDR S&P/ASX Australian Bond Fund ETF S&P/ASX Australian Fixed Income Index BOND
    SPDR S&P/ASX Australian Government Bond Fund ETF S&P /ASX Bond Index GOVT
    Vanguard Australian Government Bond Index ETF Australian Government Bonds VGB

  8. #8

    Default Re: Alternatives to term deposits

    have you look at the asx listed hybrid, some high quality hybrids are very very good
    I like Woolies hybrid (WOWHC)

    you pocket the incomes as long as you keep it and you can sell them on market if you want to access
    to the cash.

    some like WOWHC you can even make money on it...it currently trades at $104 on $100 face value.

    there are a lot out there just stick to the high quality business one and you do hell a lot better
    than bank deposit.

    there are obvious risk as it can trades below face value but stick to the top business like woolie
    your hybrid should be pretty safe.

    hybrid is not as simple as term deposit but it worth wise to acquire this knowledge because each hybrid is different, some goes on forever, some goes for 5 years, some redeem with shares etc...

    PS: best to fill your head with information and the area you like to park your money, most people scare because they lack the knowledge to make an informed decision, or the industries is filled with people with vested interest it hard to tell who is the good guy... finance is not hard, most people assume it hard but with a bit of research and reading you can get your ahead around most topic with competent .... no one look after your money better than you so invest in yourself and don't be afraid...
    "cash - a call option with no expiration date, an option on every asset class, with no strike price.” Warren Buffett

  9. #9
    sydboy007's Avatar
    Join Date
    Dec 2012
    Blog Entries

    Default Re: Alternatives to term deposits

    check out fiig. they hold seminars every so often on fixed interest.

    they provide access to quality corporate bonds that are generally paying well above TD rates. You will need at least 50K to invest with them.

    Bank shares are OK, but they have had a pretty hard run of late so the yield is down. Would say CBA is definitely too high. NAB looks good on a relative basis, and ANZ seems to be getting some traction with their Asia strategy.

    Unfortunately access to corporate bonds in Austrailia is quite hard compared to the USA or Europe. I've been checking out the managed funds and most of the them want to slice off anywhere from 0.5% to 1% in fees.

Similar Threads

  1. Term deposits
    By NewOrder in forum General Investment and Economics
    Replies: 20
    Last Post: 26th-July-2011, 10:59 PM
  2. Best Bank for term deposits
    By Lucstar in forum General Investment and Economics
    Replies: 13
    Last Post: 21st-May-2011, 12:52 PM
  3. Alternatives to Term Deposit?
    By neutralbaby in forum General Investment and Economics
    Replies: 6
    Last Post: 7th-November-2008, 11:20 AM
  4. 30 term deposits
    By bergers_n_fries in forum General Investment and Economics
    Replies: 8
    Last Post: 29th-September-2008, 08:29 PM
  5. Still investing in Term Deposits?
    By Leanat11 in forum Medium/Long Term Investing
    Replies: 3
    Last Post: 1st-June-2008, 12:40 PM

Tags for this Thread


Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
Aussie Stock Forums