I strongly disagree.If your horizon is 3 years, you should be in the stock market and not deposits.
How long would you lock in for?
If you are thinking of locking in for three years for example...
1) Your plans may change and you might need the money before that.
2) If your horizon is 3 years, you should be in the stock market and not deposits.
Brendan
Interest rates this time next year will be higher or lower than now - or maybe even the same
The truth is no one knows - not even the "experts"
You should base your actions on what is available now and what your requirements/needs are - trying to second the guess the future is futile and a waste
It's a good point. I have my mortgage locked at 1.95% for another 5.5 years so why not lock in savings, rather than pay down mortgage? Currently with Trade Republic at 4%, but that is variable.Term deposit rates are currently up to 4.25% for a 1 year term with Raisin.
Some Irish banks pay 3.00% for various terms.
Not that long ago term deposit rates from Irish banks were near zero and Raisin offered low returns too.
Many commentators expect the ECB to start cutting rates next year. Some don't.
Maybe I'm stating the obvious but it would seem to me that now might be a good time to consider locking in rates before potential ECB cuts and banks start cutting too. But could be wrong.
That advice goes against almost anything I have ever read on the matter. 3 years is nowhere near the length of many a financial crisis. Typically, investment horizons of around 15 years are mentioned, for "safe" investing in stocks, to make sure you have the time to ride out any crisis before you need to sell. If there is any possibility that the cash will be needed in 3, 5 or even 10 years then the stock market is really not the place to have it. 3 years - no way Jose.2) If your horizon is 3 years, you should be in the stock market and not deposits.
That advice goes against almost anything I have ever read on the matter.
But how do you know the OP or somebody else reading this advice isn't in exactly this position (or needs the cash for something else that he can't borrow for)? This is a very common scenario (saving deposit for a house), not some edge case.Case study 2.
Renter with €50k deposit who intends to buy a house in 3 years.
If he loses half his deposit , he won't be able to buy a house.
So he should stay in cash as he can't handle the risk.
Boss if a bookie offered you 2/1 on the toss of a coin would it be rational to bet the house on it? Loss aversion can be perfectly rational.There is a psychological loss aversion where we place more weight on losses than gains, but it's not rational.
Fair enough. But the Equity Risk Premium is "rational". It is what the market thinks is a fair price for risking loss - i.e. there is an implied risk aversion. Whether this is a good trade off for you depends on your risk aversion versus the market's risk aversion. I buy all the theory, but I myself am very risk averse. I invest substantially in "risk free assets" knowing the odds are stacked against them. You describe my approach as the risky one, I don't think I buy that.Hi Duke
I would be happy to bet one of my houses but not all of them.
Of course I would not bet all my assets but if I got 2/1 I would make a substantial bet.
And it would be even better if I got repeated goes at it.
Brendan
I invest substantially in "risk free assets" knowing the odds are stacked against them. You describe my approach as the risky one, I don't think I buy that.
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