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The top of this cycle for ASX200, cash is king ?


kahuna1

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Hi all,

Bit of a newby & might be inappropriate to raise this topic during this current rally.

Any way, when cash is King, I would love some advice as to where to "park" the cash, with out hurting too much. Objective was (?) to preserve capital during volatile uncertain times, but am happy with a small risk on the capital to get the return up a wee bit.

 

So for say $100,000;

Comsec's trading account (at call, no fees) offers 2%

CBA term deposit for 4 months is 2.35% but capital is tied up. (2.45% for 12 months)

ETF tracking "hi interest" eg AAA.asx pays about 2.4% (I think?) but brokerage fee of 2 x $300 means capital has to be tied up at least 8months for just a 2% return

ETF tracking Aus Bond market offers 2.82% (I think), but again brokerage fees tie the cash up.

 

So am I missing something or any suggestions for a better than term deposit interest rate with short term easy access?

 

Many thanks

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Totally depends on how fast you need the cash back. Online 'at call' savings takes a couple of days to get to for larger amounts. TDs much harder to break nowadays without penalties. I've just ended up putting it back into the market via high div ETF (VHY) cause the fully franked yield was about 10% and I ended up deciding that from here the 7-8% buffer over cash rates covers the risk.
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I found the Macquarie Prime margin lending account the best option for me several years ago when i was looking. I don't know how competative it is now. Currently it pays 2% at call for positive balances, interest calculated daily and credited monthly and %7.2 for negative balances. No fees. It has been a useful tool for me I borrowed big on it pretty much at the bottom of the 2008/09 crisis and sold off enough to make it positive again at the end of 2013 when i viewed things as expensive again which seems to have been a good move in hindsight. It may sound like an exaggeration or that I'm spruiking but I retired 5 years ago at the age of 43 by and large thanks to that account. Now patiently waiting for the crash so i can do it again but been tempted by the banks recent lows.

 

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Many thanks to all those that replied. It has made me do some homework.

 

Certainly seems to me that Banks are the likely best place for me to "park" cash when reducing exposure in equities due to concern that the market may head South.

 

Exploring CBA a bit further, they have a "Goal Saver" account that currently offers 2.7% with conditions (eg add $200/month, max is $100,000, 2 accounts can be opened, no fees, max of one withdraw per month). Suits me and beats the mattress option.

 

Slayer, thanks for your comments and particularly " It depends on how long you leave the cash invested".

Not sure though that the ETF for Hi dividend equities is the way to go for me in an assumed falling market, even given your comment that the 10% return (includes the franking credit) is a good buffer if the price drops. For example, assuming $100,000, a VHY.AX price drop of just 2%, brokerage fee (Comsec $300 to buy & $300 to sell), then if my calculations are correct, you need to leave the $100,000 invested for over 4 months to break even compared with the Bank interest of 2.7% (& no costs). Of course you are in front after 4 months, but that might be a long time to tie up cash and the price drop might be > than 2%, but I guess you then bail. (VHY price dropped 17% in 2015).

 

The Bond ETF (eg IAF 3.7% return) gives better security over capital, but gets back to your "how long leave it invested". Break even here compared to bank interest is 6 months so I guess more of a medium/long term defensive investment rather than "parking cash" in a market downturn.

 

Many thanks, have just opened a Goal Saver a/c

 

Regards

 

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  • 2 months later...
  • 6 months later...

Hi,

 

its time ...

 

but will take a while to write it.

 

Welcome to the new world. Revolution occurred .... people desperate for change /// polarized voting and voted for the one person or candidate who already has said he will NOT do three simple things and the ONLY things that will help.

 

He in fact said the opposite in most cases to what is desperately needed.

 

And those three things are ?

 

Nothing new from me ...they are the only solution and they just sadly voted the one candidate in that utterly assures the poor of no change.

 

Back in a week or two with the novel.

 

Most if not many have any idea what happened and why ... especially in the USA.

 

It is with great regret USA now fighting what is a bush-fire and all poor people desperate for change ctuall elected a madman who believe putting more petrol on the fire will work ...

 

I pray for vision but sadly the line has been cast.

 

Cheers back in Dec

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