Prior to the GFC, you could build a retirement portfolio on the back of a 7% yield, virtually risk free. Today, without that free kick, a 7% yield is a much harder job, especially from a risk-budgeting perspective.
Trailing a rising market can feel like missing out - but pure pursuit of highest returns can have unintended consequences. Protecting capital on the downside has a material impact on total returns.
A deliberate blend of emerging market debt and high yield opens up another universe of liquid, high income opportunities which can offer relative stability in returns and deliver the potential of higher income.
I believe time allows signals to surface amidst the ubiquitous noise. In the spirit of the hit Fleetwood Mac song "Don't Stop" that urges a future focus, I offer this year's set of five-year-forward global predictions.
Somehow the optimal growth/defensive asset split from the 1980s is still considered "balanced" today - never mind that for the first time since the 1930s, the cost of capital is stubbornly static at a negative real return.
One of the best performing equity sub-asset classes over 20 years is seemingly being ignored. Investors should seriously consider an allocation to Global SMID equities in their portfolios.
We can never know for certain how the macro backdrop will change or which investment style will dominate. But focusing on uncovering fundamental earnings leadership tunes out market noise, and enhances returns.
The decade since the GFC has been a challenging period for value style equity investing. Not surprisingly, investors are questioning the value of value investing.
Many investors are reconsidering a strong traditional overweight exposure to Australian equities. But structural forces driving domestic growth continue to support an overweight allocation to Australian equities into the 2020s.
Portfolio managers and investment advisers still too often follow their own values, rather than their clients’, when making investment decisions. In the 2020s, values will move from the periphery to the focal point for successful investments.