Market Vectors director of investments and portfolio strategy Russel Chesler said the general forecast from analysts is that interest rates will remain around 2.5 per cent right through to the fourth quarter of 2014.
Mr Chesler said taking into account the recent increase in inflation along with tax, these low rates mean cash investments such as term deposits and online savings markets are actually generating negative returns on a real return basis.
He believes investors should instead consider alternative higher-yielding options such as market sector funds.
“If we take a look at the Market Vector’s Australian Banks ETF, that’s currently yielding when you take franking credits into account at over six per cent,” he said.
According to Mr Chesler, exchange traded funds (ETFs) also offer investors improved diversification in comparison to directly investing in company shares.
“For example, if an investor picks one bank they are going to get the performance of that one bank, and if that bank does well, they are going to do well and if it does badly, they are going to underperform,” he said.
An ETF such as the Australian Banks ETF would instead offer the investor exposure to the big four banks along with Macquarie, Bendigo Bank, Adelaide Bank and Bank of Queensland, he said.
