If you’re chasing investment income, the race this year between bank shares and money kept in bank accounts has been no contest. But there may be worrying times ahead for investors. QA Partner
Cash deposits are looking crook after several years of interest rate cuts.Source:Supplied
Bank shares have blitzed bank deposits in the battle for higher investment returns this year, and the gap is widening.
As savings account interest rates tumble below 1.5 per cent, shares in the big four banks are paying dividend yields between 5.8 and 6.8 per cent, or 8 per cent-plus once franking credit benefits are added.
While it’s tempting to transfer cash savings into bank shares, share specialists warn that it’s much higher risk, which was illustrated by last week’s sharp sharemarket sell-off.
Baker Young Stockbrokers managed portfolio analyst Toby Grimm said financial markets were predicting more interest rate cuts to come, but he stressed that shares and cash were “not the same”.
Falling interest rates have squeezed savings account returns to below 1.5 per cent.Source:Supplied