Cash, in online savings accounts and money market accounts, is becoming the hot investment tool for the wealthy, according to a survey released this week by HSBC Bank USA.
“Today?s smart investors are bullish about cash and active about finding the best returns for this sometimes overlooked asset class,” said Martin Glynn, CEO of HSBC Bank USA.
HSBC Bank USA surveyed more than 700 individuals, including 472 “mass affluent” individuals who have between $100,000 and $1 million in invested assets.
It defined cash and cash equivalents as cash held in a bank checking or savings account, CDs, cash in brokerage accounts and money market accounts. The survey was done in May.
Martin J. Steinik, a portfolio manager and analyst with Baltimore-based Brown Capital Management, agreed that wealthy investors are turning to high-yield savings accounts.
“What you have is the ability to earn 4 percent and 5 percent annually risk-free in a money market account,” Steinik said.
Online savings accounts can pay high annual interest rates such as 3 percent, 4 percent and higher because overhead costs are low with no branches to build or tellers to pay.
But Steinik warned that cash should not be the only investment tool.
“People have to be careful. They are acting as trader when they should be acting as investor and looking at long-term goals. Stocks and bonds are the best long-term investments,” Steinik said.
About 58 percent of investors said they are considering cash as an investment.
Stephen Cohen, a spokesman for HSBC Bank, said his company got huge responses to itsonline 4.8 percent annual percentage rate savings account first offered in November 2005.
By the end of 2005, the savings account had $1 billion.
By March 2006, it had $3.8 billion, Cohen said.
“Although online savings accounts are relatively new to the personal finance landscape, two-thirds of “mass affluent” investors and three-quarters of the financial advisors surveyed are aware of this savings vehicle,” said Kevin, Newman, head of personal financial services for HSBC.
By the numbers
» Seventy-six percent of financial advisors said they would recommend an online savings account to their clients.
» Seventy-two percent of investors believe they can receive 3 percent or more on a savings account today.
» Eighty-four percent of wealthy investors said they are interested in an online savings account.
