Money saved in the bank is earning half what it was 10 years ago - around 3.5 per cent and there's every indication interest rates won't be bouncing back any time soon.
Spare a thought for European savers who are facing the prospect of "paying to save" as their interest rates drift down to hit zero or even negative numbers.
Yet with interest rates at historic lows New Zealand households have 23 per cent of their investment money in the bank, which is a higher proportion than the countries we like to compare ourselves to, including Australia.
It's a fascinating market, says Australasian Investment Manager Andrew South of QuayStreet Asset Management, which has seen many investors with an over reliance on bank term deposits as their core investment. While cash is an important component of any investment portfolio, it should not be the only investment in a portfolio.
On the other hand - the low interest rate environment has created "bond market refugees"- investors who are turning away from traditional bonds and term deposits, in favour of high dividend yields from New Zealand shares. "They're looking for greater returns, but you have to go up the risk curve if you want to do that."
South says diversification provides the upside of returns from shares when the markets are strong and the protection of alternative investments when the markets falter. "If you're in a diversified portfolio that's the best you can do if you think the markets are going to be turbulent."
How money should be split between different investment types will depend on your stage of life, your tolerance for risk and your investment aims. A couple with a young family are going to want different things from an investment compared with a retiree.
It is important to invest with a clear objective. Otherwise, like an athlete without a goal, you and your investment will flounder. If you don't understand investing, it is important to get advice from someone who is qualified to do so.
Directly investing in shares can be a daunting prospect for many and requires a reasonable amount of money up front to ensure your risk is spread by buying in to a number of different companies, across a range of sectors. However there are options for smaller investors. Instant diversity can be achieved through a managed fund, often for small sums of money.
Managed funds allow you to pool your money with other investors and invest in a range of companies, infrastructure projects or governments. Investment decisions are made by specialists who assess the different investment options and create portfolios to meet the risk profile of the fund. Many funds are designed to cater for various risk profiles and investor objectives such as generating income or building a nest egg over time.
South says QuayStreet Asset Management looks to invest in good quality businesses in sectors with prospects of strong growth, such healthcare, aged care and technology.
QuayStreet favours investments that have the ability to ride through economic cycles.
"We keep calm under fire and have a focused approach to stock selection and that's how we have generated our returns. If you have most of your investment in cash (bank deposits), I strongly recommend you seek investment advice to better understand the options available to you and what best suits your life stage and investment objectives.
To find out more about investing in a fund, or diversifying your investments click here
The Quaystreet Funds are issued and managed by QuayStreet Asset Management Limited and the Product Disclosure Statement is available at quaystreet.com. For further information please contact our Client Services team on 0800 782 900 or visit quaystreet.com. Investments are subject to risk and values may go up and down. This information is general in nature only and does not take into account your financial position, needs, goals or risk tolerance. No liability is accepted for the results of any actions taken or not taken upon the basis of this information. Before making an investment decision we recommend you contact an Investment Adviser. QuayStreet Asset Management is a wholly owned subsidiary of Cragis Investment Partners Limited. Adviser Disclosure Statements are available on request and free of charge.