Think beyond term deposits for smarter long-term gains

While term deposits offer certainty, they may no longer deliver the returns needed to outpace inflation or grow long-term wealth. There’s no better time than now to consider a more diversified investment strategy—one that includes shares, bonds, and expert guidance to help you make informed decisions.

Term deposits still have a place, but less power
Term deposits have long been a go-to option for conservative investors because they offer fixed returns and low risk—perfect for short-term needs. But in a falling interest rate environment, their limitations shine through. The Reserve Bank of New Zealand has been cutting the Official Cash Rate since mid-2024, which has led to lower term deposit rates. In many cases, these rates now struggle to keep pace with inflation, slowly eroding purchasing power over time.

Diversified portfolios are a stronger long-term strategy
For those looking to grow their money over time, a diversified mix of shares and bonds has historically delivered stronger results. Over the past decade, a balanced portfolio has returned around 8% annually—enough to turn a $100,000 investment into $215,000. In contrast, rolling six-month term deposits at 3% would have only grown to $135,000 over the same period.

Yes, market investments can be volatile. But with a long-term view—typically five years or more—their potential to generate greater returns makes them a compelling option for future-focused investors.

Choose investments that match your goals
Every investment serves a purpose. Term deposits work well for short-term savings goals, like funding an upcoming purchase. But for goals that are years or more away—such as retirement or supporting your children’s education—market-based investments can be more suitable.

Funds structured as PIEs (Portfolio Investment Entities) also offer tax advantages, with a capped rate of 28%—significantly lower than the 39% top personal income tax rate that applies to term deposit interest.

Balancing the now and the next
The good news? You don’t have to pick sides. A smart investment strategy can combine short-term certainty with long-term growth. Term deposits may still have a role in meeting near-term needs, but if your goals extend beyond the next six months—whether that’s retirement, supporting family, or building long-term wealth—accepting some short-term market movement can lead to significantly stronger outcomes over time.

That’s Milford’s focus: long-term investing powered by discipline and expertise. It’s not about chasing quick wins—it’s about staying the course, especially through market volatility. And that’s where expert advice can make all the difference.

Smart moves start with smart advice
Reassessing your investments during a time of falling interest rates is a wise move. But navigating your options alone can feel overwhelming. A financial adviser can help you weigh the pros and cons, explain strategies like dollar-cost averaging to manage volatility, and tailor a plan that fits your needs.

Investing is a journey—and having a trusted guide by your side can make all the difference.

Want more investment insights? Check out Milford’s The Investing Place for exclusive masterclass content, news and opinion pieces.