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Do You Need Steady Capital or Sustainable Income?

As providers of a wide range of financial services in Perth, we have helped a lot of your neighbours achieve their financial goals. However, there is no such thing as a “one size fits all” investment because everyone’s individual situation is different.

Steady Capital or Sustainable Income

One of the basic questions we like to ask our clients is whether they are looking for steady capital or sustainable income. Recently, our parent company, AMP Capital, addressed the effects of the low cash interest rate on cash investments. While a low cash interest rate is good for the economy, it tends to reduce the value of cash investments such as term deposits.*

As you probably know, the cash interest rate is still at a record 2.0%. For comparison, it was at 7.25% in August 2008 and 4.75% in November 2011. *

Cash Investments

Term deposits and other cash investments have traditionally been regarded as “safe” investments because the value of those investments is usually stable. Historically, interest rates have been enough, even when in a “low” cycle, to provide adequate return on investment (ROI). However, interest rates are now at record low levels.*

Consequently, cash investments are now providing returns that are barely more than the current inflation rate. In other words, they provide steady capital for the short term, but not sustainable income over the long term. *

Investment Portfolios

Investment portfolios that are diverse and well-managed, containing infrastructure, properties, equities and corporate bonds, are now able to provide an income stream that is reasonably predictable and attractive to investors.*

However, investors have to understand that portfolios such as those mentioned above are subject to short-term volatility.*

Call Approved Financial Planners Today

Everyone’s financial situation is different. The information we provided in this piece is good general information. However, we can’t give individual financial advice until we talk to you about your individual finances. To learn more, call 08 6462 0888 today.

*AMP Capital, “Is sustainable income or steady capital your goal in a low interest rate environment?”
http://www.ampcapital.com.au/article-detail?alias=/site-assets/articles/media-releases/2015/2015-05/is-sustainable-income-or-steady-capital-your-goal