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Home / SMSFs / SMSF investing / SMSF investment options / The role of cash and bonds in your portfolio and what’s available

The role of cash and bonds in your portfolio and what’s available

Barbara DruryBarbara Drury

In a nation where property investment is a national sport and the sharemarket plays a starring role on the nightly news, cash and bonds are decidedly less glamorous.

But recent experience of high inflation and interest rates changed the investment landscape and raised awareness about the importance of defensive assets to provide stable income with a high degree of safety.

Cash and 10-year government bonds are considered ‘risk-free’ and are the yardstick other investments are measured against when weighing up the risk you take for the returns on offer.  

Cash may not be king but it has been providing attractive income after years in the doldrums although you will need to look beyond bank savings accounts to get the best returns.

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About the author

Barbara Drury
Barbara Drury
Barbara is a financial journalist and author with over 30 years’ experience in Australia and the UK. She is a contributor to The Sydney Morning Herald and The Age Money section, and has worked for the Australian Financial Review and The Australian. Barbara is the author of Alan Kohler’s Eureka Report Guide to Personal Investing, Sorting Out Your Finances for Dummies and Personal Finance for Dummies and co-author of Investing for Dummies with James Kirby.
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Response

  1. Tony Gianduzzo Avatar
    Tony Gianduzzo

    Treasury Indexed Bonds (TIBs) held to maturity are also worth a mention as another risk-free option. They are individually Exchange tradable, or as ETF indexes. Yields are lower, but recently the index yield was as high as 1.7%, plus ongoing inflation adjustment to the underlaying bond. Unlike 10-year treasuries, they therefore avoid inflation risk. TIBs, like all bonds, are still susceptible to market changes in required real yield, hence the “held to maturity” caveat.

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