Question for the financial gurus amongst us (aka Leigh): How would you recommend somebody start out in investing?
Lets say we have $5k to invest, for the medium term (at least 5 years). I’ve heard good things about Index Funds due to their low cost compared to actively managed funds – something like Vanguard’s LifeStrategy High Growth Fund caught my eye, but it’s just an example.
Thoughts?
I assume Wazza will be able to offer me an answer on this but anyone who has something to say should, by all means, answer.
My question is regarding government bonds and or treasury bills, and ordinary bank savings accounts. Please correct me when I get things wrong here as I am quite sure I will.
As far as I am aware U.S treasury bills have returned an average of about 3.9% over the last 75 years and long term government bonds have returned about 5.7%. Therefore I guess you could say that the risk free rate is about 3.9% give or take. I am not sure what the Australian equivalents are like but we can just work with U.S products for now.
I know in Australia that there are many savings accounts you can set up that offer 6% with little or no fees and I assume that in the competitive U.S banking market you could get similar rates?
My question is, assuming there is no limit on the amount of money you can put in that savings account and still receive close to 6% why would you invest in treasury bills or bonds at all when 6% is effectively your risk free rate?
Possible answers I have thought over but am not sure of are that it is usually corporations that invest in bills and bonds as they cannot have the same savings account that an individual can have. Or there is a limit to how much money you can have in the savings account and still earn 6%.
