Is Now a Good Time to Lock Savings?

Due to the current interest environment investing in the stock market for a short period is even riskier than previously. In todays environment duration should be extended.

Don't think anybody should invest a large portion of money in the stock market for 3 years when they have a known liability at the end of the 3 years.
 
Past performance is not an indicator of future performance.

Anybody looking at the stock market returns for the last 10 years would think it is a no brainer. That was during a time of 0% rates, investors seeking a return had little option but to invest in equities. Similarly companies could raise debt cheaply and buy back their stock which helped inflate prices.

Interest rates now are >4% so investors can get yield from other places and as pointed out some of that is considered 'risk free'
 
DublinHead54 said:
some of that is considered 'risk free'
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Well it should not be considered risk free.

People are making a choice between "risky" equities and "risk free" deposits and they are totally misguided.

In the short-term deposits are less risky than equities.
But in the long-term, deposits are much riskier.

Neither is risk-free.

Brendan
 
Depends how you define the “long term”…

Stocks for the long run?

It's commonly stated that stocks provide superior long-term returns to bonds. But what does "long-term" mean in this context? Over the last 20 years, the S&P500 has produced an annualised 4% return, with all dividends reinvested. That's an annualised real (after-inflation) return of less than...
www.askaboutmoney.com
 
Brendan Burgess said:
Well it should not be considered risk free.

People are making a choice between "risky" equities and "risk free" deposits and they are totally misguided.

In the short-term deposits are less risky than equities.
But in the long-term, deposits are much riskier.

Neither is risk-free.

Brendan
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What is the logic to support cash being riskier than equities? I think you are conflating returns and risk.
 
Risk is the chance that you might lose money on your investment.

If you leave money on deposit long term, you are very likely to lose money.

Brendan
 
I see younited reduced their interest rates for 3 year etc on raisin. i would imagine its based on a reduction in interest rates in march.
 
Sarenco said:
Do you mean in real terms?

If so, I disagree. It is a myth that the long-term real returns on cash deposits are negative.
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In real terms they are - once you factor in inflation, money on deposit loses every time
 
jpd said:
In real terms they are - once you factor in inflation, money on deposit loses every time
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Not true.

Look at the long-term return on T-Bills as a proxy for cash - it’s (modestly) positive in real terms and it is trivially easy to access bank deposit rates that are higher than the rates paid on short-term government debt.
 
With about 40k in savings. Partly from downsizing house.
no major expenses planned for the near future, I’ve been putting the max into my avcs and DB pension. I plan to increase my monthly AVCs rather than panic at the deadline and sweat over making a last minute transfer like I usually do. (Age 61)

been looking at Raisin, some good options there.

but every time I look there are slightly different options. Feeds into my anxiety so I postpone the decision.

I think I’ll need access to about 8k in a years time. But i should be able to save that aside from the 40k.

how do I get off the fence and just do it?

aside from therapy is looking at the Raisin options a good way to view the options.
 
Brendan Burgess said:
Risk is the chance that you might lose money on your investment.

If you leave money on deposit long term, you are very likely to lose money.

Brendan
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You are not likely to lose money, assuming interest rates are 0 if you deposit 100 Euro after 1 year you will have 100 Euro. There is no price risk, what you are describing is the purchasing power of the cash has reduced. Inflation risk does not just apply to deposits.

If I invest a 100 Euro in stocks today, I don't know what it will be in 1 year, but there is a greater likelihood that it will be more or less than 100 Euro than if I put it on deposit.

Deposit = No Price Risk + Inflation
Stocks = Price Risk + Inflation
 
In terms of the question about putting some into cash for deposit or keeping it all- unless the amount is enormous keep it all cash, you don't know what price you will end up purchasing or costs you will run into- why would you want to lose the flexibility to manage/buy assets?

At 3 odd % gross returns one really needs to be putting a substantial amount away to justify locking money away in my opinion, there is an admin burden and loss of flexibility.

If one has a rainy day fund already and cash piling up then they would in many cases be in a position to make a long term bet (stocks or pension). I can't think of many scenarios beyond this- most people don't know they will need to trade up in 5 years!
 
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