Invest
How to balance liquidity with returns
When you’re investing your own money, it’s important to stay liquid in case of an emergency or just to keep up with your lifestyle. But in a climate of low interest rates, how can you do so without sacrificing your return?
How to balance liquidity with returns
When you’re investing your own money, it’s important to stay liquid in case of an emergency or just to keep up with your lifestyle. But in a climate of low interest rates, how can you do so without sacrificing your return?
Most people with assets of any worth have them tied up in superannuation and property, which means their wealth is largely locked up.
Super is a wonderful concept but unless you are retired, it’s very much a “hands off” proposition since the government has designed the system to prevent you from accessing your savings until 55 at the earliest.
As for property, that definitely involves locking up your money. Certainly, property can be a great long-term bet. But what’s worrying at the moment is that a lot of people of working age are deciding property is the best place to be. But in reality, after you pay off the real estate agent to manage your property, interest costs and stamp duty, there may not be much left, especially in the first years after buying a property.
Of course, negative gearing helps, that is, the generous tax deductions which you get by deducting interest and rental running costs from your taxable income, which cuts your tax bill. But negative gearing doesn’t negate the fact that you have to pay substantial expenses in the first place.
The main problem with property is interest rates risk, that is, that rates will rise. That’s not so likely at the moment, with the official Reserve Bank interest rate having been cut to an historic low of 1.5 per cent. But rates won’t stay low for ever. Eventually, they’ll rise and this can push down the value of property.
There are far better ways to keep your investments liquid.
Number one is cash, of course. But just remember you will be lucky to earn 2 per cent in a deposit account. Fixed interest investments such as term deposits will pay a little more but you usually have to lock up your money for that privilege.
Which brings us to listed securities such as shares. Yes, they can go down as well as up but the stock market is highly liquid. You can buy and sell shares any day the ASX is open for business, which is all weekdays except public holidays. You can access your funds quickly, if you need to.
It’s worth considering initial public offerings (IPO). Companies that are joining the market, or being floated, tend to have to issue shares at a slight discount. And the returns at the moment are so far ahead of most other investment categories that you have to look at the numbers twice.
During July the nine companies that were newly listed on the ASX saw their share prices rise by an average of 15.7 per cent, according to the OnMarket July IPO Report 2016.
That was a month when the general share market went well, climbing by 9.4 per cent if you use the standard measure, the S&P/ASX200 index.
And how liquid are the investors playing in that IPO market? The answer is, very liquid once floated. There’s always a time lag between subscribing for shares and being able to sell them, which is one of the reasons for the discount, but it seldom exceeds a month, and if you sell shares, the money drops into your account no more than three days after the trade.
It’s worth a thought, especially if your wealth is mostly tied up in property and cash, which is true of most of us.
Tim Eisenhauer, managing director, OnMarket BookBuilds
Stock market
Trading app popularity skyrockets as retail sector booms
In 2021, trading has never been easier for retail investors, meaning the number of users on trading applications has exploded to an all-time high. ...Read more
Stock market
ETF rush predicted to intensify
The Australian ETF sector advanced AU$6.3 billion in August to hit a new milestone, as its popularity among financial advisers soared. ...Read more
Stock market
The 6 unique Australian market affects that all active managers can exploit
The uniqueness of the Australian equities market is providing fund managers with an opportunity to essentially beat the market, new research has revealed. ...Read more
Stock market
‘Don’t believe the hype’: ASIC warns of risks for new market participants
ASIC has expressed concern that inexperienced or uninformed investors are putting their capital at unnecessary risk when tempted into the market by questionable marketing strategies from market promot...Read more
Stock market
How do you choose the best ETFs?
In recent years, exchange-traded funds have become an increasingly popular option among Aussie investors. ...Read more
Stock market
Lockdowns instigate a rise in new investors
Despite COVID-19 leaving individuals and businesses to face an uncertain future, retail investors’ appetites for shares have increased throughout the pandemic, a new report has found. ...Read more
Stock market
‘Code red for humanity’ a wake-up call for private and public investment
Retail investors that have been advocating for sustainable and ESG investing are hoping a new report released by the United Nations will serve as a wake-up call to the financial industry and governmen...Read more
Stock market
Rising inflation set to help the next super cycle for investors
Central banks around the world are largely tipped to increase interest rates over the medium term due to inflationary pressures, with investors urged to look at the upcoming growth cycles that will em...Read more
Could property prices inflate by another 20%? What’s happening in recent dividend announcements? Did your fund fail the YFYS test?
Listen now
What does the NSW regional permit mean for property investors? Who really wins from the BHP-Woodside merger?
Listen now
The sea and tree-change norm; Square’s acquisition of Afterpay; Why you should think twice before turning to TikTok for advice
Listen now
The Olympic effect on property and equity investors; COVID-19 Disaster Payments and super
Listen now
Stock market
Trading app popularity skyrockets as retail sector booms
In 2021, trading has never been easier for retail investors, meaning the number of users on trading applications has exploded to an all-time high. ...Read more
Stock market
ETF rush predicted to intensify
The Australian ETF sector advanced AU$6.3 billion in August to hit a new milestone, as its popularity among financial advisers soared. ...Read more
Stock market
The 6 unique Australian market affects that all active managers can exploit
The uniqueness of the Australian equities market is providing fund managers with an opportunity to essentially beat the market, new research has revealed. ...Read more
Stock market
‘Don’t believe the hype’: ASIC warns of risks for new market participants
ASIC has expressed concern that inexperienced or uninformed investors are putting their capital at unnecessary risk when tempted into the market by questionable marketing strategies from market promot...Read more
Stock market
How do you choose the best ETFs?
In recent years, exchange-traded funds have become an increasingly popular option among Aussie investors. ...Read more
Stock market
Lockdowns instigate a rise in new investors
Despite COVID-19 leaving individuals and businesses to face an uncertain future, retail investors’ appetites for shares have increased throughout the pandemic, a new report has found. ...Read more
Stock market
‘Code red for humanity’ a wake-up call for private and public investment
Retail investors that have been advocating for sustainable and ESG investing are hoping a new report released by the United Nations will serve as a wake-up call to the financial industry and governmen...Read more
Stock market
Rising inflation set to help the next super cycle for investors
Central banks around the world are largely tipped to increase interest rates over the medium term due to inflationary pressures, with investors urged to look at the upcoming growth cycles that will em...Read more
More articles
Website Notifications
Get notifications in real-time for staying up to date with content that matters to you.
