Bonds vs High Interest Savings Accounts (Australia)

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Bonds vs High Interest Savings Accounts (Australia)

Post by alex123711 » Mon Aug 12, 2019 6:09 pm

Just wondering if bonds are still worthwhile upgrading in Australia or since interest rates are a bit higher here (still only 3%). Are you better off putting money into a HSA and getting 3% or a vanguard bond index.

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Re: Bonds vs High Interest Savings Accounts (Australia)

Post by mishmash » Thu Aug 15, 2019 9:48 am

In the event of an interest rate cute, bonds will be worth more than their face value. However your savings in the HISA will be subject to the banks lowering the rate they are paying.

If you have an offset account on your mortgage with current rates at around 3.5-3.9 this is the best place to put your money for the highest return and is also tax free.


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Re: Bonds vs High Interest Savings Accounts (Australia)

Post by andrew99999 » Thu Aug 15, 2019 10:16 am

During different parts of the economic cycle, returns of intermediate term bonds can come close to the returns of HISA, which appears to be the case now, so at this time HISA which offers no risk but a similar return seems fine. How long this will be the case can't be known until it is in the past, but in the long term, cash is almost guaranteed to have lower returns since risk and return are inextricably linked.

As noted above, if you happen to have a property loan, then an offset offers higher return and less risk making it an obvious choice.

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