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How to outperform the market with cash strategies

Matthew Lemke

With the cash rate falling to a new historic low in June, investors are finding creative ways to boost their savings pool without sacrificing liquidity.

Portfolio manager at Prime Value Cash Plus Fund, Matthew Lemke believes it’s possible to outperform the market with cash investments, but warns there are risks in deterring from traditional cash deposits.

“It’s possible to keep risk down yet still outperform the rate available on term deposits and other cash investments by targeting selective securities issued by major banks and financial institutions, and having a strong focus on capital preservation.”

Where will cash rates land?

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Being more actively aware of different offers on cash products in the market is important in the mid term, as the official cash rate is likely to drop again.

A change in the Reserve Bank of Australia’s thinking means another rate cut is certainly possible in the foreseeable future.

Chief economist at AMP Shane Oliver has recently suggested that rates could fall by as low as 0.5 of a percentage point next year.

“With unemployment at 5.2 per cent and inflation well below the RBA’s target 2–3% band, the Australian economy had significant spare capacity, warranting the rate cut, with more likely,” Mr Lemke said.

“The significance for investors is Australian interest rates will stay lower for far longer than anyone expected. Investors will be under even more pressure to find ways to replace lost income from cash holdings.”

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How to outperform the market with cash strategies
Matthew Lemke
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