Scared of volatile equity markets? Here are 5 term deposits to explore

Highlights

• Emerging from a two-year long pandemic has presented a laundry list of problems, not the least of which is rapidly rising inflation.
• With high inflation come rising interest rates, which leave Australians scrambling to stash their money in something that can act as a hedge against inflation.
• One tried and true option for concerned investors is the term deposit, which offers a risk-free alternative to grow one’s savings.

It’s an uncertain time for the global economy. Emerging from a two year long pandemic has presented a laundry list of problems, not the least of which is rapidly rising inflation.

Australians have been blessed with extremely low interest rates in recent years. However, with high inflation inevitably come rising interest rates, which leave Australians scrambling to stash their money in something that can act as a hedge against inflation.

Sadly though, with the added monetary pressures of the pandemic looming over the economy, stock markets are showing extreme volatility, making equity investment a risky affair.  Cryptocurrencies, like Bitcoin (which has previously been dubbed “digital gold” in reference to its perceived benefits as a store of value), have been far from comforting over the past few months, leaving investors wondering where to put their capital until the economy begins to shine a little brighter.

One tried and true option for concerned investors is the term deposit, which offers a risk-free alternative to increase one’s savings balance.

What is a term deposit?

For the uninitiated, a term deposit is, in essence, a savings account one opens for a specified amount of time. This can be months or even years. Throughout that time, the investor is locked out of that account, unable to access the money that lies within it. In return, the bank in which the account is held, pays a fixed interest to the investor.

At the end of the term, the investor can either withdraw the money or reinvest part of or all of the accumulated funds.

Term deposits are considered low-risk and safe investments. However, they still offer a higher interest rate than a regular savings account because the investor is unable to access the money.

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It’s important to note that if an investor chooses to access the funds before the chosen term is finished, they can do so. However, a penalty will be incurred – usually part of the interest rate is forfeited.

While interest rates are historically low now, a term deposit can still be a handy option for someone with a stash of money that would otherwise suffer the corrosion of inflation in a regular savings account.

Moreover, with the current volatility in the share market as well as the underwhelming performance of cryptocurrency in recent months, a term deposit may be just what the doctor ordered.

There are countless options in this investment field. Here are five of the best term deposits available for Australian investors.

1. MyLife MyFinance Term Deposit

Minimum opening deposit – AU$5,000

3-month interest rate – 0.80%

6-month interest rate -0.85%

12-month interest rate – 1.10%

24-month interest rate – 1.20%

48-month interest rate – 1.45%

2. Judo Bank

Minimum opening deposit – AU$1,000

3-month interest rate – 1.10%

6-month interest rate -1.15%

12-month interest rate – 1.15%

24-month interest rate – 1.45%

48-month interest rate – 1.85%

60-month interest rate – 1.95%

3. AMP Term Deposit

Minimum opening deposit – AU$25,000

3-month interest rate – 0.35%

6-month interest rate – 0.40%

12-month interest rate – 1.00%

24-month interest rate – 1.35%

48-month interest rate – 1.75%

60-month interest rate – 1.85%

4. MyState Bank Online Term Deposit

Minimum opening deposit – AU$5,000

3-month interest rate – 0.25%

6-month interest rate – 0.70%

12-month interest rate – 0.80%

24-month interest rate – 1.20%

5. ME Term Deposit

Minimum opening deposit – AU$5,000

3-month interest rate – 0.35%

6-month interest rate – 0.50%

12-month interest rate – 0.70%

24-month interest rate – 1.20%

48-month interest rate – 1.50%

60-month interest rate – 1.60%

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Bottom Line

While the returns offered by term deposits won’t necessarily change your life in a big way, something safe and stable could be exactly what is needed, especially during tough and uncertain economic times.