Think cash is king? Not lately.
Cash investments are considered relatively stable investments. Super fund members looking to invest their super can opt for cash options to diversify their investment portfolios, reduce risk and to get cash-like returns in a short investment horizon.
While none of this has changed, lately, the combined effects of lower interest rates and inflation have led to negative cash option returns, especially after fees and costs are paid.
What has led to cash returns being negative? The Reserve Bank of Australia cut interest rates three times since March last year, bringing the official cash rate to a record low of just 0.10%. While this has helped the Australian economy grow, it has impacted the traditional cash fund returns, because the official cash rate affects the market interest rates available to investors.
Add in the risk of inflation, as well as any administration and investment fees, and it’s easy to see how cash investment returns may erode.
As Super is a long-term investment, it’s important to consider the impact of negative returns on cash on achieving your desired investment returns and retirement plans.
If you have any questions, please email us at email@example.com or call us on 1800 025 241.