Alternatives to Cash in Low Interest Rate Environments

An important element of Harvest’s Investment Advisory process is to ensure that our clients have a sufficient emergency fund in place as a safety net for any future unforeseen financial events. Emergency funds should typically have three to six months’ worth of expenses in the form of highly liquid assets, often in demand or short-term deposit accounts.

However, Irish deposit interest rates are among the lowest in Europe. Once your emergency fund requirement has been met it is sometimes difficult to see any significant current benefit from leaving funds sitting in deposit accounts. When tax is deducted (Deposit Interest Retention Tax – DIRT – is 33% of any interest you receive on your cash) the combined effect is that the real value or purchasing power of your funds in cash is decreasing year on year.

Despite the compelling case for investing in asset classes such as equities and property over the long term; for some clients who are simply looking to achieve a return in excess of current deposit interest rates, moving to a portfolio with a significant weighting to these asset classes is too risky a move to contemplate.

We have found in recent years that there is a genuine appetite from clients for investments which, while not completely risk-free, aim to deliver steady returns over time with relatively lower levels of volatility than that of equity-based portfolios.

Harvest’s Cash Alternative Strategy

In response to this demand, Harvest launched the Harvest Cash Alternative Strategy in July 2017. Our Investment Advisory department researched over 150 funds in the international investment marketplace to develop a diversified portfolio of funds that met the following criteria:

cash alternative

Not surprisingly, such funds are not common and from the original list of c.150 the vast majority failed to meet at least one of the above criteria. On conclusion of their research the Investment Advisory department narrowed the list down to just three liquid low volatility funds which satisfied all of the above criteria.

The three liquid low volatility funds that were selected are from major global fund management houses. Each of the liquid low volatility funds match the selection criteria described above and are designed by the fund manager to produce a steady return over time.

cash alternative

As always, our advice to potential clients is to stay balanced (through diversification), stay flexible (through appropriate liquidity) and most importantly, to stay invested.

To discuss whether Harvest’s Cash Alternative Strategy is a suitable home for a portion of your funds on deposit contact Harvest on 01-2375500.

See more on the Cash Alternative Strategy.

Investment Advisory Service

This marketing information has been provided for discussion purposes only. It is not advice, it is provided for general information purposes only and does not fully take into account your financial position, investment needs and objectives, attitude to risk, liquidity needs, capital security needs, capacity for loss, etc. It should therefore not be relied upon to make investment decisions. Prior to any formal investments taking place you will be provided with a detailed suitability letter taking into account all the above and outlining why the investment(s) are (not) suitable for you.

Warnings: The figures refer to the past. Past performance is not a reliable indicator of future results. The value of investment(s) in the selected fund(s) may go down as well as up. If you invest in the selected fund(s) you may lose some or all of the money you invest. Past performance is not a reliable guide to future performance. Income may fluctuate in accordance with market conditions & taxation arrangements.

The particular tax treatment contained herein is based on Harvest Financial Services Limited’s understanding of current Revenue practice as at February 2020. Please note that the tax treatment depends on the individual circumstances of each client and may be subject to change in the future. You should take such independent tax advice as you deem appropriate.