Long-term investors, get more for your bang

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August 25, 2010

If you have spare cash lying around and are considering the best options to get more bang for your buck, listen up.

While short-term investors are benefitting from investing their money in online savings accounts compared to a short-term deposit right now due to higher interest rates. Long-term investors could fetch a higher return with longer-term deposits in comparison to online savings accounts.

According to data from RateCity, more people have been opening savings accounts than term deposits in July. The data showed that while the number of applications for term deposits for July has increased by 44 percent since June, there were 19 percent more people applying for savings accounts than term deposits.

In July 2010, the data showed the average rate for longer-term term deposits was higher with a one-year term deposit at 5.90 percent, three-year was 6.42 percent and five year was 6.56 percent. While the average savings accounts rate for a deposit of $5000 at 4.85 percent.

Long-term investors can earn more with long-term deposits
Currently one of the best two-year term deposits advertised on RateCity (as at August 23) is at 6.70 percent with ING Direct, while Virgin Money's Virgin Saver is at 6.75 percent for the first four months, at which point it then reverts to a variable rate of 5.35 percent.

If you deposited $5000 into both accounts, at the end of two years you will earn nearly $120 more in interest by depositing your money into the term deposit account.

Why choose term deposits right now
If you are an investor looking to invest you cash, here are some reasons why you might choose a longer-term term deposit instead of an online savings account:

  • Term deposits are less volatile fixed-term investments, and are fetching much higher rates than savings accounts, making this a better option for most long-term investors.
  • Generally speaking, the longer the term the higher the interest rate. One of the current best rates on RateCity for a one-year term deposit is with RaboDirect at 6.50 percent while a five-year term deposit is offering 7.34 percent with Investec.
  • Term deposits are easier to manage, as you just deposit the money and let it be. Some online savings accounts state that you have to deposit a minimum amount each month to continue receiving the high interest rate.

So get more out of your money, shop around and compare long-term deposits online then sit back and watch your investment grow.



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