Better options to invest large sum of cash than Term Deposits???

[SBQ]

SBQ, I didn't have the problem you describe on the scale of your relative. But I did get my biggest ever shareholder payout when I sold the bulk of my RBD shares into the takeover offer last year. I couldn't face investing what was for me a large sum. So I elected to 'kick the can down the road' and divide my windfall into five. This meant I had five bank term deposits maturing in 6 months, 1 year , 18 months, 2 years and 3 years. I have since reinvested my six month term deposit for two years. So I now have an equal amount of capital maturing in six monthly blocks for the next two and one half years.

2.7% may not seem a lot for a term deposit. But it still beats putting your money into an overvalued asset that will plunge in value. My aim is to buy good dividend paying NZ shares with this money eventually and I am now seeing opportunities that I did not see even six months ago.

Personally I would keep well clear of real estate in New Zealand. If you see the relative affordability of property in Auckland to be 10% worse than in London or 20% worse than Sydney or Vancouver then you know a serious correction is coming. Best bet in real estate IMO would be to buy a flat in New York - seriously! Very expensive in NZ dollar terms, but there are lots of well heeled people there that can pay a high rent

SNOOPY

The compelling issue with buying real estate in NZ is the huge difference in tax treatment than in interest earning term deposits. While NZ housing market is over valued, the metrics have not changed. It was over valued when I 1st came to NZ 20+ years ago and the NZ gov't has done nothing to promote affordability. We are not seeing anything changed and that's the reality. It seems from a tax perspective, all the incentive is not to invest overseas and instead, buy bricks and motar.

Meanwhile, the NZD currency continues to erode...

[Snoopy]

The compelling issue with buying real estate in NZ is the huge difference in tax treatment than in interest earning term deposits. While NZ housing market is over valued, the metrics have not changed. It was over valued when I 1st came to NZ 20+ years ago and the NZ gov't has done nothing to promote affordability. We are not seeing anything changed and that's the reality. It seems from a tax perspective, all (1) the incentive is not to invest overseas and instead, buy bricks and mortar.

(2) Meanwhile, the NZD currency continues to erode...

I invite you to look at your sentences that I have labelled (1) and (2) SBQ. If (2) isn't a good incentive to invest overseas, then I don't know what is.

I should add that one way our property market can correct on the international comparative yardstick is for our currency to heavily depreciate relative to those comparator currencies of countries we like to compare ourselves to!

SNOOPY

[SBQ]

I invite you to look at your sentences that I have labelled (1) and (2) SBQ. If (2) isn't a good incentive to invest overseas, then I don't know what is.

I should add that one way our property market can correct on the international comparative yardstick is for our currency to heavily depreciate relative to those comparator currencies of countries we like to compare ourselves to!

SNOOPY

Well it's an interesting point and kind of a tug-O-war. We have locals in NZ that view investments as... buying real estate and we have those in NZ that invest in shares.. looking to invest abroad (ie. foreign index ETFs). The weakening of the NZD will hurt EVERYONE (both who are pro-real estate and those who are pro-kiwi Saver that have a focus on overseas equities). Don't forget, even the savers of the NZD will get slammed as interest rates continue to tread lower.

The incentive is not simply there to invest overseas because as NZ residents, we earn in NZD - well pretty much most people make a living earning paid in NZD. We also have an issue of the NZ FMA regulation that from a tax perspective, disadvantages those that invest abroad or conversely, incentivises those to buy NZ equities despite they may have marginal performance (ie. higher corporate taxes compared to overseas corporations) + NZ equity market is like 0.4% of the global investment market.

[peat]

if you (or your proxy) really cant accept the rates offered by a Trading Bank then another option is to lend to NBDT's, Non Bank Deposit Takers. Finance companies as such, and there are higher rates available with perhaps not so much risk as you thought. You could examine the reports of say Liberty or General and see what you think.
I only mention the ones I know of without an explicit recommendation as such, although I probably would use General the one I know most about. I understand they have good mortgages over real estate for most of their loans and will pay up to 5% for 2 years, and rates varying around that. At the same duration as you got 2.7% from ASB they offer 4.1% so its quite a big % increase in income generated by the deposit.

Finance companies come in different sectors and different structures of course but I think its fair to say they largely don't resemble the bad times of them which the sector remains tainted with.

Its an option to be considered and and the amount used in this fashion would all depend on the persons risk tolerance and values apportioned appropriately etc etc
Im just saying its an option to increase return. Whether the risk is justified or not is a personal decision.

PS I have no interest in the mentioned firms.

[HKG2301]

if you (or your proxy) really cant accept the rates offered by a Trading Bank then another option is to lend to NBDT's, Non Bank Deposit Takers. Finance companies as such, and there are higher rates available with perhaps not so much risk as you thought. You could examine the reports of say Liberty or General and see what you think...

I'm in a similar situation: cash heavy, which is a good place to be right now, I reckon. Until recently, I was invested with Liberty Financial at good rates (4.4%) but it was due to drop to 3.4% on renewal, so I took the cash. I'm sure they'll be fine, but Liberty's BBB- rating wouldn't let me sleep at night in these uncertain times. Now I'm looking at commercial property and/or NZX shares, but in no rush to jump into either. I can see all the world's markets re-visiting their March lows before we work our way out of this recession, even NZ.

[GTM 3442]

If I was an Australian looking at Term Deposit rates, I would be finding that 2.7% on offer in New Zealand quite attractive:

https://www.anz.com.au/personal/bank...fees-terms/#td

I have some Australian term deposits coming due this month, and those AUD sure won't be going back into bank TDs. They'll be going into an Australian government bond ETF, current yield +/-2.75%, maintaining the current asset class allocation and currency profile.

If I was a New Zealander and convinced that the NZD/USD rate was due to fall, I would be looking at a 0% foreign currency account - possibly in Australia to take advantage of the government deposit guarantee scheme. I note that Betashares are forecasting an AUD/USD rate of $0.62 later in the year, and the NZD has a strong tendency to follow the AUD.

As far as fees, charges and the like go, the New Zealand financial services industry may have become dramatically cheaper over the past 25 years, but it remains ridiculously expensive and overpoweringly entitled, and the options for investment outside New Zealand may be cripplingly limited, but those are, sadly, the rules of the game.

[SBQ]

If I was an Australian looking at Term Deposit rates, I would be finding that 2.7% on offer in New Zealand quite attractive:

https://www.anz.com.au/personal/bank...fees-terms/#td

I have some Australian term deposits coming due this month, and those AUD sure won't be going back into bank TDs. They'll be going into an Australian government bond ETF, current yield +/-2.75%, maintaining the current asset class allocation and currency profile.

If I was a New Zealander and convinced that the NZD/USD rate was due to fall, I would be looking at a 0% foreign currency account - possibly in Australia to take advantage of the government deposit guarantee scheme. I note that Betashares are forecasting an AUD/USD rate of $0.62 later in the year, and the NZD has a strong tendency to follow the AUD.

As far as fees, charges and the like go, the New Zealand financial services industry may have become dramatically cheaper over the past 25 years, but it remains ridiculously expensive and overpoweringly entitled, and the options for investment outside New Zealand may be cripplingly limited, but those are, sadly, the rules of the game.

Yes they are rules of the game according to NZ's FMA. Interestingly, they're imposing foreign brokers 'who provide services to NZ residents, AND if these firms offers derivatives / options / FX in their business, then they must be 'licensed by the FMA' in order to deal with NZ clients. This is sound a bit extreme and I remember globally how bad it was when the US imposed FACTA around the world. It's 1 thing to ask banks to report to the IRS for tax reporting on their US citizens but, to say to foreign sovereign nations that they're doing things illegally by serving to NZ clients?

As a matter of interest, here is cash deposit schedule at TDAmeritrade. FDIC insured and funds that are simply left in the account (ie. not actioned to be put in a term deposit):

https://imgur.com/ONv1ZXc

Canada use to have similar fee schemes by their brokers, circa in the 80s and early 90s. It could not of lasted long being next to the US but in NZ's case, I highly doubt it would change much. Not with FIF which distorts the global investment field.