Average Australian investors who turned their back on the share market in favour of term deposits after the global financial crisis (GFC) may need a wake-up call. The “average” Australian investor sought security after the GFC hit, tucking their spare cash into term deposits. But as their savings sleep safely in the bank, unfortunately their investment gains are on snooze too. The GFC created a lot of negative publicity for the share market and the government saw an opportunity in that and ran with it — putting a guarantee on our Big Four banks.
This caused a massive shift of funds into term deposits and there’s been a lag effect as many have just forgotten about it and left it there. Most big banks now hold their term deposit customers to ransom, imposing a 31-day notice period requirement under the Basel III reforms for those who wish to access their funds before the maturity date. So you could pretty much sell a house in the time it now takes for a bank to release your money back to you!
We think that blue chip stocks are still a great investment and deliver a much better return than the banks will give you. And if you’re buying in the right areas, property can still deliver good returns.