Term deposits remain number one

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Term deposits remain the investment most Kiwis believe will give the best return, though low interest rates are prompting renewed interest in shares.

Tuesday, February 14th 2012, 6:59AM 1 Comment

by Benn Bathgate

“Investors now appear to be resigned to the reality of a low interest rate environment which could stretch into next year and beyond and are adjusting their expectations accordingly,” said ASB head of private banking and wealth management Jonathan Beale.

The latest ASB Investor Confidence survey found term deposits retained the top spot for the seventh consecutive quarter with 19% of respondents believing they offer the best returns, up one point from last quarter.

Rental property remained the second most popular investment class at 14% followed by KiwiSaver, down two points at 11%.

Shares, bank savings accounts and managed investments were all equal on 9% but Beale said over the longer term, shares had been increasing in popularity.

“Since Q3 2010 shares have been creeping upwards in popularity from 5% to 9% as the investment that gives the best returns. Meanwhile bank savings accounts have slowly dropped since the start of 2010 from 14% to 9%.”

Beale also cited a number of other factors for the rise in shares popularity, including the wider finance company sector collapse, the successful Trade Me float and a lessening of investor caution.

“I think over the last few years safety and caution – am I going to get my money back – has always been one of the things people focus on, but people are starting to go that’s lovely, but I’ve still got the bills to pay and I can’t do that when the interest rate is 4%,” he said.

While overall investor confidence dropped one point to a net 5%, Canterbury recorded a sharp rise in investor confidence – up from a net 1% to 12%.

“Renewed confidence in Canterbury as the region looks ahead to the recovery phase is almost certainly lifting the result for the rest of the country,” Beale said.

“An 11% jump is significant, and shows that sentiment in the region is recovering after taking an unsurprising dive following the February 2012 earthquake.”

Benn Bathgate is a business reporter for ASSET and Good Returns, email story ideas to benn@goodreturns.co.nz

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