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.
Central banks have proved willing and able to keep stock and bond prices elevated. For long-term economic well-being and financial stability, a policy response is needed that extends well beyond their traditional remit.
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.
Calendar 2019 is ending on a relatively positive note, especially compared to the same time in 2018. Policymakers have a chance to "fix the roof while the sun is shining".
If we want a vibrant capitalist future in the 21st century, we need to support ethical legal frameworks for capitalism and practice Conscious Capitalism.
Alpha still matters and an active approach can enhance portfolio returns, creating extra saving to be spent in retirement.
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.
With interest rates on government debt at multi-decade lows, a number of leading economists have argued that almost every advanced economy can allow debt to drift up toward Japanese levels. This ignores what can go wrong.
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.
Whether they realise it or not, investors use factors every time they make an asset allocation decision. Combining multiple factors can help investors increase the chances for investment success.
The conversation with retirees needs to move away from projections based on averages and volatility risk measures, towards a probability-based assessment of running out of money.
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