When the cash rate gives you lemons, make lemonade

Take care of the pennies, and the pounds will look after themselves. At least, that’s how the old saying went back when the cash rate was higher than 1.5%.

You’re probably aware that this month the Reserve Bank of Australia (RBA) announced its decision to leave the cash rate unchanged at 1.5%. As the 20th hold since 2016, the decision comes as no surprise with the national and global economy strengthening and inflation remaining low across the board.

Philip Lowe, Governor: Monetary Policy Decision said in the RBA’s June media release, that business conditions are positive, and investment non-mining business is set to increase.

Overall Australia is doing well, and the RBA board have confirmed that they expect the low-level interest rate will continue to support the Australian economy.

This low interest rate environment is great for those with variable rate home loans; however, on the flip side, cash deposits are now yielding less than 2%. The challenge now exists for retirees and other investors to seek a better return for their hard-earned wealth, without taking on equity risk.

Make lemonade with cash-style alternatives

Despite the current cash rate, there are options that investors can consider when trying to boost the potential of their cash. One of these is developing a diversified portfolio of fixed interest asset classes such as bonds, term deposits, and other income and debt securities. However, these may have restrictions on access to the funds or may be exposed to movements in interest rates.

These types of managed funds provide investors with access to a diverse portfolio of underlying investments that seek to perform above a set benchmark. In addition to the returns provided by the underlying investments, investors also benefit from the expertise of the fund manager who adds value through their experience, knowledge, and discipline for asset selection.

The particularly low interest rate environment and demand for investment income from cash and other fixed interest asset classes is why, at Trilogy, we established Trilogy Enhanced Cash.

Trilogy Enhanced Cash is a fund of funds that blends the security of cash and underlying cash-style asset classes with the yield available from the Trilogy Monthly Income Trust.

The Trust invests approximately 70% of its portfolio into cash, term deposits, and managed funds that hold investment grade cash-style investments. The remainder of the portfolio is invested into the Trilogy Monthly Income Trust, an unlisted first mortgage trust with a strong track record of discipline and consistency.

This strategic asset allocation combined with Trilogy’s liquidity management processes is designed to deliver investors with above benchmark returns and fast access to money within 7 days*.

Be sure to pick the right fruit for your lemonade

Before making an investment decision, it’s always helpful to shop around and seek professional advice from a licensed Financial Adviser. All investments involve risk and an Adviser can take a holistic view of your current circumstances, your objectives, and your needs, and help bridge the gap between where you are now, and where you want to be. This involves the development of a strategic financial plan supported by a diversified portfolio of investments and other financial products which are recommended in your best interests.

If you’re looking for an alternative to invest your hard-earned savings with a fund designed to provide a return above the current cash rate, learn more about Trilogy Enhanced Cash or chat to a member of our investor relations team about our current investment offerings.

* See the Product Disclosure Statement for details about redemptions, including the compulsory redemption provisions and the maximum time allowed for redemptions under the constitution.

This article has been prepared by Trilogy Funds Management Limited (Trilogy) ABN 59 080 383 679 AFSL 261425 as responsible entity for the managed investment schemes mentioned in this article. Trilogy has issued a Product Disclosure Statement (PDS) for each of the managed investment schemes mentioned within this article. The PDSs are available at www.trilogyfunds.com.au or by contacting us. You should obtain a copy of the relevant PDS, understand the risks, and seek personal advice from a licensed Financial Adviser before investing. Investment in the Trust is subject to terms and conditions, and risks which are disclosed in the PDS. These risks include the risk of losing income or principal invested. Applications will only be accepted on the current application form that accompanies the PDS. These managed investment schemes are not a bank deposits and Trilogy does not guarantee their performance. Trilogy provides only general financial product advice on its own products and does not consider your objectives, financial situation, or needs in providing such advice.


Sources: https://www.rba.gov.au/media-releases/2018/mr-18-14.html

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