Term deposits 'are still alive and kicking'

While many people were disappointed with the Reserve Bank of Australia's (RBA's) decision not to lower interest rates this month, there was one group of Aussies who were more than happy with the announcement – term deposit holders.

By keeping the national cash rate at 3.25 per cent, the RBA reduced the chances of banks lowering the rates attached to their term deposits.

These products are popular as they offer higher returns than standard savings accounts and are safer than other investments.

Writing for Investor Daily, Angus Bell of Goldman Sachs Asset Management said deposits are still "alive and kicking" despite the fact national interest rates have been slashed by 1.5 points since November 2011.

He stated that the funds are a "sleep easy" investment when there is uncertainty in the markets.

However, he advised people who are building a retirement savings pot not to completely rely on this type of product and instead take a "multi-asset approach".

Mr Bell feels people need to find a balance between risky investments and safer, low-yield funds.

"I'm not suggesting retirees should stick it all on black and hope for the best just as they shouldn't necessarily stuff it under the mattress," he wrote.

Have a question about term deposits? Ask the money gurus at Mozo Answers.