Pondering the Long Term Future of Fixed Term Deposits ...

RetiredInThailand

grey_gym_sock wrote: »

do you mean absolutely all debt should be avoided? i think that's going a bit too far the other way.

for individuals (other than when running a business), i'd say mortgages are usually the only sensible debt to take on,....

I'm not against all debt; just unsustainable and/or pointless debt. Like you, I have nothing against people borrowing within their means to buy their home, or perhaps a sensible car they will use for work and suchlike. But over the last few decades people, businesses and countries have been borrowing heavily to pay for pointless nonsense like the latest iThingy, or fancy holidays, or a big flat-screen TV, or a flash second car that mostly just sits in the driveway, even fancy meals out, and it is this sort of unnecessary expenditure on tick that has ruined global and individual economies.

I think the trick is to make do with something modest until you can afford something better, rather than to borrow heavily in order to have everything today.

gadgetmind

grey_gym_sock wrote: »

for governments, ... well, it's currently a bit of a mess ... but given where we are now, i think the government needs to spend more on infrastructure, training and education

That's exactly the point. Governments and individuals should borrow so they can invest in key assets that will improve their long-term financial situation.

It's also quite normal for governments to borrow during recessions both to make ends meet and to fund such investment. What isn't normal is for governments to keep on borrowing during boom times, as this is when they should be reducing their debt.

Labour kept on borrowing and borrowing and borrowing, come rain or shine, and rather than investing the money sensibly they blew it on winning the hearts and minds of the easily swayed.

This is unforgiveable.

meunier

Bless you all for your much considered debate on this issue. It is hugely appreciated.

Labour kept on borrowing and borrowing and borrowing, come rain or shine, and rather than investing the money sensibly they blew it on winning the hearts and minds of the easily swayed.

Having put funds into a selection of five year term deposits last year - (and it is true I am risk adverse - being a dutiful son to late parents raised during the midst of the 1930's depression) - I am hopeful that by 2016 the QE roller-coaster will have well and truly run its course - as painful as it may ultimately prove to be. With QE !!!!!! and, with the forced addition of more careful regulation, surely the old-fashioned instrument of raising funds by banks/building societies will - one would surely think - have to return to fashion .... e.g., re-establishing the puritan idea of 'earning' it ... as foreign, of course, as that well NOW sounds in British environs hereabouts.

gadgetmind

I find your faith in banks rather touching.

I'm lending my money to major companies via investment grade corporate bonds, and to companies building roads, schools, hospitals, ports, etc. via investments in infrastructure companies. The returns of 5%-6% yield and maybe 8% total return are nothing to get excited about, but it beats sub-inflation savings accounts despite the lack of guarantees.

TCA

meunier wrote: »

Having come through the Iceland nightmare - and thankful for not having lost any of my capital - VERY thankful indeed - I last year split up all of those resources up into an assortment of £85,000 bundles in five year fixed term deposits (as then recommended by this board) to let them rest over time.

I also got tangled up in the Iceland debacle via Kaupthing Isle of Man. Ironically, I split up my savings and moved them there because of the £35k compensation limits at the time. Had I left them where they were I'd have been fine!

Anyway, like you I have fixed term/fixed rate deposits of up to 5 years but am now planning to gradually swap them into income-producing investment trusts as they mature. I'm a non UK tax payer so do have concerns about the returns matching the 4.5% net I get overall now (which will diminish granted), but I believe equities will improve the total return by boosting the capital element over time. My other concern is perhaps that the main markets will move sideways for a while but I still think I'd rather be in them than in cash.

meunier

Thanks again for all your most kind advice. It is greatly appreciated.