An investor using a high-dividend investment strategy over the past 10 years would have been much better off than if they had left their money in cash, according to research from State Street Global Advisors. It found $100,000 in quality Australian shares paying strong, sustainable dividends in June 2002 would have returned $37,700 more by June 2012 than if the investor had held a term deposit paying average rates of interest. The high-yield strategy would have risen to $105,000 in the 10 years to June 2012 and generated dividend income of $85,600 (including franking credits) over the whole period.

In contrast, the real value of a $100,000 term deposit would have been eroded by inflation and generated interest income of $52,900, according to SSgA.

“The figures suggest that investors who retreated to the security of term deposits during the market volatility of recent years may have been better off allocating funds to a high-yield equity strategy,” says Amanda Skelly, head of SPDR ETFs at SSgA.

“While the security of cash may be tempting, it is critically important for investors in their early retirement years who no longer earn a salary to have some element of capital growth in their portfolios.

“Investors who want their retirement savings to last for 10, 20 or even 30 years need to maintain their exposure to capital markets so they keep pace with inflation.”


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