50k into 24 month 1.15% p.a. term deposit, did I make a mistake?
Context:
I'm 23 y/o, live with family for obvious financial reasons. While I do pay for all the pet care/internet and some communal food/fuel I obviously am still mooching a lot from my parents.
The amount I'm saving doing this is crazy. From living alone and working full time I would spend 70% of pay-check on fundamental necessities. Now thats down to 20%. Which was enough for me to save 50k in a couple of years.
I know that money just sitting in a savings account is a bit of a waste so I really wanted to do SOMETHING with it. I looked into buying an investment property but while I have enough for the downpayment, I am paid minimum wage and I also reduced my hours so that I could study while working. So I didn't think I was earning enough to confidently maintain mortgage payments.
I spent a lot of time thinking about if and where I should invest. Asked some early beginner questions in this stack too. My savings goal is just to maximise money so that after I finish studying in a couple years, I can be well off enough to apply for jobs anywhere knowing I would have the financial capability to make a deposit on a house in that area. I may not immediately buy, I just want to have the capability to do so. Because this could happen as early as just 2 years from now, there is a good chance the investment would only be for 2 years. Unfortunately the only style of investing I was comfortable with would be long term, where my plan would be to simply select a bunch of companies from various index funds, and then let the money sit there for 10+ years. Anyway, in the end I could never muster the courage to invest anything, since its only for 2 years, holds a fair amount of risk and I know I am a complete novice, I didn't feel confident enough to make the right decisions.
Months passed with the money just sitting in savings and I have finally just thrown it all into a 2 year term deposit at my local bank (National Australia Bank) because I clearly wasn't doing anything else with the money. 1.15% is tiny, but its actually better than what the other banks in my area offer. Just 1.15% definitely still feels like a waste. Did I make a mistake?
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The most important thing you did was have the opportunity and discipline to save a significant amount at a young age; this was not a mistake. You might have earned a little more in the next 2 years in a more sophisticated investment, but even if you'd got a great yield of 5%, that is only k difference. And if you'd made some unsuitable high-risk investment as a novice, you might have lost all k.
Your k (plus what you continue to save) will be there in 2 years for you to make good decisions with based on all the knowledge you will have by then -- whether for an emergency fund, home purchase, and/or long-term investments. The savings habit you've established will be far more valuable over your life than 2 years' return on k.
I salute you and see no mistake here.
Since Australia is possibly at risk of a recession due to a growing slowdown in China, the two-year bank deposit is a very good investment.
However, a two-year government-bond in a brokerage account could show a gain in value if there were a recession. In fact a two-year government-bond in a brokerage account could be leveraged if such economic views are held. Or a leveraged government-bond ETF might be found. Another choice is gold but probably not gold-mining stocks.
Or if the Australian currency were hedged with a sell of the AUD/USD then the position could receive a small rollover interest, probably 1/4 of one percent, on the leveraged amount.
Other choices, if not expecting recession, are bank stocks, telecommunications stocks, and real estate stocks. Basically, this is an equity-income category.
Possibly a big mistake, but being australian your options are limited unless you are willing to take currency risk.
I.e. I have some of my funds in a financial institution in switzerland paying me 8% in daily available funds, but they only accept deposits in EUR, USD or GBP - so one woul have to leave the australian dollar or hedge this risk, which add significant complication for someone not fluent with forex operations.
Given from what australia looks like from a european perspective you may be better buying gold - there are chances all major economies will get into some higher inflation brackets soonish, stocks are overpriced, australia what I hear has a terribly overprived real estate market. Which means there really are not a lot of options - and your interest rate will already with that inflation result in a net loss of purchasing power.
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