Term deposit

Stop comparing term deposit rates now

The information in this article is market commentary only and reflects Lincoln's views and beliefs at the time of preparation, which are subject to change without notice. To obtain up-to-date information, please contact us.

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’s academic
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.

Source: Lincoln Indicators

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.

Source: Bloomberg & Lincoln Indicators

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.

It’s easy to tap into the LAIF yield. Simply call 1300 676 333 or email enquiries@lincolnindicators.com.au. You can also request information direct from our fund specialists.

We hope you’re no longer on the hunt for the best term deposit rate, but preparing yourself for better returns.

Our guide to establishing and implementing a successful investment strategy
The Golden Rules for successful share market investing
How the Financial Health Model can work for you

#Source: canstar.com.au retrieved 15 August 2017.
Performance quoted is historical actual performance. Investments go up and down. Past performance is not a reliable indicator of future performance.
*The estimated grossed up yield is determined by forecasting the dividends and coupons for the financial instruments held in the current portfolio. The actual result achieved may differ due to a number of variables including changing market prices and/or dividend forecasts changing significantly. Such an event will result in a change to the estimated yield. As a result, though the fund is positioned to achieve its target yield, the stated estimated yield cannot be guaranteed to occur. Contact Lincoln to learn more about our estimated grossed up yield target.
Important information: Lincoln Indicators Pty Limited (Lincoln) ABN 23 006 715 573, as Corporate Authorised Representative of Lincoln Financial Group Pty Ltd ABN 70 609 751 966, AFSL 483167. Past performance may not be a reliable indicator of future performance. This communication may contain general financial product advice. Our advice has been prepared without taking account of your personal circumstances. An investment in the Fund involves risk and neither the performance of the Fund nor the security of your investment is guaranteed by the Responsible Entity or the Investment Manager. The value of your investment in the Fund will vary and there is a risk that investors will lose some of their investment.
The level of returns will vary, and future returns may differ from past returns. You should therefore consider its appropriateness, in light of your objectives, financial situation and needs, before acting on it. If our advice relates to the acquisition or possible acquisition of a particular financial product, you should obtain a copy of and consider the Product Disclosure Statement (PDS) at www.lincolnindicators.com.au before making any decision.
Where we refer to the Lincoln Australian Income Fund or the Lincoln Australian Growth Fund (the ‘Fund’), information and advice provided should be considered in conjunction with the Product Disclosure Statement (PDS) together with the Reference Guide of the Fund, which is available on request and from our website. You should read and consider the PDS and the Reference Guide before making any decision about whether to acquire or continue to hold the product. Responsible Entity/ Issuer of the Fund is Equity Trustees Limited ABN 46 004 031 298 AFSL 240975, a subsidiary of EQT Holdings Limited ABN 22 607 797 615, a publicly listed company on the Australian Securities Exchange (ASX: EQT). Lincoln and its Authorised Representatives will be remunerated since monies invested in the Fund. You should read and consider our Financial Services Guide (FSG) provided to you, which sets out key information about the services we provide. The FSG is also available at www.lincolnindicators.com.au. Neither Lincoln, Equity Trustees Limited, or their directors, employees or agents provide any guarantee, representation or warranty as to the reliability, accuracy or completeness of the information in this document and do not accept any responsibility or liability arising in any way (including by reason of negligence) for errors in, or omissions from, this document.
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