Here we take a look at the features of term deposits and investment funds, as both are great options depending upon your circumstances.
What’s your investment timeframe?
Term deposits are an excellent option for short to medium term goals, especially when you’re looking for lower risk and a fixed rate of return. With a fixed rate of return, term deposits have more certainty and offer more stable returns than an investment fund.
Investment funds, on the other hand, are suited to investors with a medium to long investment timeframe, or for those saving towards a specific goal. You should plan to hold your investment for longer so that you’re able to weather any dips in financial markets.
Over the longer-term, we expect all of the ANZ multi-asset class investment funds to have higher returns than what’s on offer from a rolling 6 month term deposit. However, it’s likely you’ll experience ups and downs in the value of your investments along the way and, for a short period of time, your return could be negative – you won’t get this with a term deposit.
Will you need access to your investment?
Even the best made plans change sometimes. So it’s important to remember that term deposits are locked in until their maturity date. You can normally break the term early, but you’ll need to provide 31-days’ notice, and you’ll receive an interest rate reduction.
All ANZ investment funds (multi- and single-asset-class) have withdrawal flexibility, allowing you to request a withdrawal of all or part of your funds on any business day. You won’t be charged a fee on withdrawal. Of course, if you need access to your money at a time when financial markets are down, you may need to accept a lower level of return from your investment than what you were expecting.
Diversification is an important factor in investing
Diversification is a word you hear a lot of as an investor, and though it sounds fancy it’s actually pretty straightforward. Here’s a simple analogy to help explain the concept.
We know that eating an assortment of food groups is the best way to make sure your body gets all the nutrients it needs to stay healthy. If you only eat one type of food, you’ll probably suffer from a lack of vitamins, which could inhibit your growth. The same can be said for diversification in investing – a lack of ‘variety’ in your investment portfolio may mean your investment portfolio does not grow enough to meet your goals.
ANZ’s multi-asset-class investment funds invest in a variety of asset classes, including income assets such as cash and fixed interest (bonds), and growth assets such as equities (shares) and listed property, both local and international. This variety offers greater potential for growth, and investment risk is spread across different asset classes meaning that any weaker performing investments can be offset by better performing ones elsewhere in your portfolio.
