Penny drops: savings are a dud Taking on the market ... shares are offering better returns that deposit accounts. So you're a self-funded retiree cursing the Reserve Bank for cutting interest rates. Don't. If the RBA has forced you to realise your term deposits are duds, the mandarins have done you a favour. Savers dependent on fixed interest have been poorly advised for decades, not just over the past year as interest rates have tumbled. The dividend flow from a boring portfolio of industrial stocks trounces fixed interest and whatever the best daily rate might be from the on-line banks. And right now, even after the market has rallied to start the year, equity yields slaughter the best term deposit rates you could have grabbed last year. Of course the yields aren't as tasty as they were in January or as extremely tasty as they were a year or two ago, but they're still fine in the general scheme of things. As a rough and simplified demonstration using five stocks (not a recommendation), the BusinessDay quotes page shows Telstra closed yesterday with a yield of 5.6 per cent, NAB 5.5, Westpac 5.2, Wesfarmers 4.1 and Woolworths 3.7 - an average of 4.8 per cent. Add the franking credits and the effective pre-tax yield is more than 6.7 per cent. Who wants term deposits? Those who think they're risk averse or scarred after confusing trading with investing will no doubt wail at this point about shares perhaps falling in price - but for someone after an income stream, the price isn't the point - it's the sustainability of dividends and their potential to grow. The price will take care of itself eventually and the capital appreciates over history. The sure thing about term deposits is that the capital is being steadily devalued and that the return from the dividends on Australian industrial stocks rapidly outpaces the best that the banks can offer. That's the key message financial commentator Peter Thornhill has been making in presentations over the past couple of decades. I've heard his story before, during and after the GFC and it has added up every time. The search for yield has been the market's main theme over the past year and it's not over yet. The analysts suggesting bank shares had reached a bubble high last week don't seem to realise that. Michael Pascoe is a BusinessDay contributing editor.