More people under 40 are investing their self-managed super fund's (SMSF) cash into five-year term deposits (TD), according to RaboDirect investments manager Tim Hewson.
The total volume of term deposits for the five years at 5.8 per cent had doubled in the past 12 months. "It used to be that 6 per cent was the magic number for term deposits," Hewson said.
"But, now with global and local volatility, maybe 'five-plus' is the new 6 per cent."
RaboBank Direct discovered the higher levels of younger people in the 20 to 30 and 30 to 40 age brackets turning to long-term TDs as data was analysed for broader deposit analysis.
These figures, combined with direct customer feedback, showed Hewson that not only older, more risk-averse customers were locking in for guaranteed returns for long terms of up to five years.
Hewson said investors of all ages were looking for "better returns without increased risk".
"With continuing speculation that the Reserve Bank will cut interest rates again before the year's end, locking money away ... can help reduce the impact," he said.
Also, the Australian Government Deposit Guarantee for funds up to $250,000 combined with online anti-fraud measures reassured customers about the safety of financial institutions.
In addition to the doubling of five-year term deposits, Hewson said three-month terms (with 4.9 per cent interest) had also "seen a jump in popularity in the past year, likely resulting from customers switching from cash to term deposits to maintain liquidity and improve short-term yields".
