Term deposits are simple. You give your money to a bank, credit union or building society for a specific amount of time (the ‘term’) for a fixed rate of income return. And, you can chase around web comparison sites for the best term deposit rate, to get more bang for your buck. But you could be wasting your time.
Some positives about term deposits…
Term deposits deliver a rate of return that’s typically higher than holding your money in a regular bank account. And there’s virtually no risk of losing your money. That’s why many Australians like to have this type of cash investment as part of their portfolio.
There’s some not-so-positives you need to know.
The one thing we’re not keen on is the mediocre returns term deposits deliver. They’re now yielding 2.0 – 3.0% p.a.# Is it worth locking away your money for months or (sometimes) years when increases to the cost of living could eat up most of the income you generate? So, chasing after the best term deposit rate could be pointless.
What’s more, if your term deposit matures and you don’t touch it, your money could automatically be rolled into a lesser-paying cash investment.
What are the alternatives?
We’re a fan of investments that have the potential to deliver much greater rewards for everyday Australians, particularly when they are packaged with strong risk management strategies.
You might be surprised to discover we’re talking about an income fund – jam-packed with the best-of-the-best income generating stocks from the ASX and is on track to deliver a 7.0 to 8.0% income yield over the next 12 months.
So, how do we know these stocks are the best-of-the best for income generation?
It goes back to 1982, when Dr Merv Lincoln (former Australian Olympic athlete) completed his PhD entitled ‘An empirical study of the usefulness of accounting ratios to describe levels of insolvency risk’. Sound technical? It was. And, it was a boon for investors.
This study became the foundation of the Lincoln Financial Health Methodology which allows everyday Australian investors to know which ASX-listed companies are quality. It’s via the team here at Lincoln analysing each listed business’ accounting ratios. Put simply, investors use it to avoid investment disasters and manage share market risk, giving them the peace of mind many term deposit holders boast about. Investors who access our Methodology have easily avoided corporate failures like Dick Smith and Ten Network, way in advance of their business failures.
Over the years since, the Methodology has been tested by academia and refined. It’s been historically proven to have a 94% accuracy rate of predicting corporate failure, and is only getting stronger. Each month the team here at Lincoln publishes its report ‘Financial Health of the market’ showing the minefield investors work with then they invest blindly.
Right now, it looks like this.
Gain way more income – every year!
Our Funds Management Team use this Methodology to select quality, financially healthy income-generating Australian equities for our portfolio that are the safest stocks on the ASX. Many Australians who might be tempted to chase the best term deposit rates, prefer to invest with us, in the Lincoln Australian Income Fund (LAIF). With an impressive quarterly distribution, they’ve effectively given themselves a pay rise as, since inception, it has paid well above both term deposits and the market.
Potential investors should be aware that being invested in shares may mean the value of your investments goes up and down. You need to assess whether you are comfortable with this. If you are a long-term investor then volatility does tend to smooth itself out.
Enjoy greater income returns starting now.
You might be surprised to learn LAIF has an expected income yield* (see here for details) of 7.0 to 8.0% p.a. this financial year. Plus:
- By investing before 28 March 2018, you’ll immediately qualify for the full FY17-18 March quarter of distributions – we’re now in one of the largest paying quarters of the year.
- In Financial Year 16-17 LAIF’s March quarter alone paid 2.38% – that’s almost the same as a full year in a term deposit!
- Plus, over the long-term (5+ years), you could be growing your investment through owning units in a portfolio of high quality, financially healthy income stocks. They’re selected according to Lincoln’s historically-proven Financial Health Methodology; it’s an academically rigorous strategy to reduce equity market risk and provides you with investment peace of mind.
We hope you’re no longer on the hunt for the best term deposit rate, but preparing yourself for better returns.