Should you be holding your term deposit cash in the BetaShares Australian High-Interest Cash (ASX: AAA) ETF?
Why People Buy Into AAA
There are quite a few reasons why some Aussies might think the Australian High-Interest Cash ETF could be a better option than sticking your cash in a simple savings account.
Firstly, the interest rates earned are higher than what you’d get with most savings accounts or term deposits. The 12-month distribution yield to 30th June 2019 was 2.0% and the current interest rate earned on the fund’s bank deposits is 1.51% after management costs.
AAA invests in a number of deposit accounts across National Australia Bank Ltd (ASX: NAB), Bankwest, which is owned by Commonwealth Bank of Australia (ASX: CBA) and ME Bank, an online-only bank.
The main benefit of this ETF versus a term deposit is that the ETF provides greater flexibility for essentially the same interest rate. Taking your money out of a term deposit early can mean losing all interest, whereas the AAA ETF can be bought and sold like shares and pays a monthly distribution.
AAA – The Negatives
Like all ETFs, the AAA ETF comes with management fees – in this case, 0.18% per year. While this is a low fee compared to most other ETFs, the fee is quite high as a percentage of the interest earned.
If you’re going to invest in this ETF, know that it’s not going to return you anything exciting, it’s simply a diversification strategy with a better interest rate than a bank account. I’d have to say this ETF doesn’t seem like the best option, although I’d take it over a term deposit.
Disclosure: At the time of writing, Max does not own shares in any of the companies mentioned.