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Is Cash Still King?

Is Cash Still King?

You will have worked with your financial adviser from outset to ensure that your assets are invested in a way that are most likely to meet your future financial objectives.

As we will examine further, for the majority of clients this involves a portfolio of equites and bonds. Cash is put aside for short term requirements or for emergencies and you will have discussed how much is appropriate for this, bearing in mind your individual circumstances with your adviser. This provides surety of your capital, but doesn’t account for the impact of inflation.

Current Interest Rate & Inflation

After a period of low interest rates following the global financial crisis (GFC) in 2008, we now have a level of interest rates that offer 12-month term deposits of around about 6%. At face value, this might seem attractive.

However, if one considers the current rate of inflation of 6.4%, then that current deposit rate is negative in real terms. So, by locking up your money for 12 months or more, you are betting that inflation comes down to an extent where the return is positive. 

Therefore, your term deposit is not ‘risk-free’, as there is a risk that the rate of inflation may continue to reduce both the spending power of both the interest and your capital.

Want to hear more?

It's important to acknowledge that there's no singular path to growing your wealth and that it depends on your financial goals, your risk appetite, affordability and timeline. Reach out to the Lync Wealth Team today, and let us help you build a strategic financial plan that unleashes the potential of your money #ForYou."