Thinking of Going with a 5.10% Term Deposit for 5 Years, Easy but Smart Move?

borgainerz on 10/05/2024 - 13:46

I'm pretty confident betting the Interest Rates are going to stay put or start decreasing over the next 12 months, so I was thinking to put $30K I just got to a Judo Bank Term Deposit at 5.10% for 5 years.

I don't need this money for the next 5 years and am hesitating between term deposit at a fixed rate (judo currently doing 5.10%) before they start lowering the rates, or eventually starting an VAS / VGS Vanguarf ETF but I know nothing about it so it will require some time from me to learn the basics.

I think it is a good time (we're are close the the point of curve reversal regarding the interest rates)

Thanks for you thoughts.

Financial Term Deposit

Comments

  • May4th on 12/05/2024 - 09:42
    +1

    how old are you? if you aren't retiring any time soon and have a 5 year horizon then there's potential for much better gains through index funds or crypto depending on your risk appetite

  • SoapyWooder on 12/05/2024 - 10:36

    What's the cheapest fee sp500 ETF, please help?

  • liongalahad on 12/05/2024 - 10:48

    Definitely not a good idea. Invest in index funds instead.

  • soggypotato on 12/05/2024 - 23:38

    If you don't need the money then just do it for fun and for the experience

  • Cluster on 13/05/2024 - 00:05
    +1

    I locked in a 7.5% 5 year term deposit at the start of the GFC with Rabobank. As central banks kept cutting interest rates my smile grew wider. It is possible to beat the so called smart people with all the computers. Just look at how many interest rate rise predictions the CBA got wrong. All throughout 2022 they kept saying maybe 1 or 2 more at most. Wrong again, and again.

    Is locking in 5.1% a smart move now? I honestly don't know.

    • borgainerz on 13/05/2024 - 09:55

      Nice one, I think you got the highest offer

  • Prosp24 on 13/05/2024 - 01:23

    Not great, as interest earnings would be taxed at your marginal tax rate.

    Investment options that utilise capital gains tax discount should provide better post-tax outcomes. Everyone's indivudal financial situation will be differ.

  • Hangryuman on 13/05/2024 - 17:07

    5.1%pa fixed for 5 years - with break costs if you withdraw earlier - not recommended.

    I have 3 ETFs - which my IRR spreadsheet shows as having returned 7%, 19% and 22%pa last financial year before tax (which I think you'd pay anyway on your 5.1% interest). On value alone, they have increased by 11%, 25% and 64% in the last 12 months.

    the rule of 72 for doubling - divide 72 by the growth rate to find how many years to double your money - indicates 22-5.1%=~17% more would double your money in 72/17 = a bit over 4 years.

    So - in 4 years time would you rather have double your money - or not ?

    • kiitos on 16/05/2024 - 19:24

      Which ETFs?

  • cupcake on 31/05/2024 - 13:38

    Yes.

  • deandownunder on 01/06/2024 - 09:12

    When this question was first asked the comment posted on 10th May was that interest rates were going to remain static or go lower. How times change in less than a month. Blind Freddy can see the RBA is heading into a tightening phase so money invested for 5 years @ 5% would not give the best return. I would only be investing on a 12 months max.

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