Alternatives for growth in a low cash rate environment
Despite interest rates remaining at historic lows, AMP Capital says there are five alternatives to cash and term deposits that may provide investors with growth opportunities.
Since the global financial crisis, the Reserve Bank has cut the official cash rate by half to 2.5 per cent. Coupled with the change to the government guarantee on deposits in 2012, rates for terms deposits have fallen sharply, according to AMP Capital director and head of retail and corporate business Craig Keary.
"For investors who see more growth, we've identified five alternative investments that will help them better achieve their investment objectives now and even if interest rates rise in 2014," he said.
Corporate bonds can help to ease investors back into the market because they don't have the same volatility of equities, AMP stated.
Lower debt levels and a stronger focus on the underlying business makes Australian real estate investment trusts (A-REITs) another good alternative to cash.
Unlisted commercial property and the strong long-term yield associated with listed and unlisted infrastructure are also viable alternatives.
According to AMP Capital, investors should also consider Australian equities because they are currently offering attractive income through dividends, which may also offer potential tax benefits.
"Those who are invested in cash but who are seeking greater growth or are interested in adding more diversification to their portfolio should speak to their financial adviser about the other opportunities that are available to them in this low-interest rate environment," Keary said.
Recommended for you
VanEck is expanding its fixed income range with a new ETF this week to complement its existing subordinated debt strategy which has received $1 billion in inflows this year.
Specialist global equities manager Nanuk has celebrated 10 years of its flagship New World Fund and is actively considering its next possible vehicle.
Australian equities manager Datt Capital has built a retail-friendly version of its small-cap strategy for advisers, previously only available for wholesale investors.
The dominance of passive funds is having a knock-on effect on Australia’s M&A environment by creating a less responsive shareholder base, according to law firm Minter Ellison.
