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Saturday, 5 December 2020
Recently trending Five ways the Retirement Review points to new policiesGraeme Shaw on why investing is at a pivotal momentRetirement Review gives strong views on hoarding of super11 key findings on retirement dreams during the pandemicBank scorecard 2020: when will the mojo return?
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Bonds have been strong performers over many decades and always play a role in defensively-positioned portfolios. There are some basic principles investors should understand such as the types of yield.
With negligible returns on term deposits and cash, investors who qualify as 'wholesale' are turning to a range of bond alternatives where yields are more attractive for taking some extra risk.
The 60/40 diversified portfolio has been the mainstay of the superannuation industry for decades. But it is built on a fundamental principle of defensive bond returns, and its time is nigh.
Fixed income opportunities beyond term deposits and hybrids remain scarce for retail investors, but active bond funds can access other securities where value is still available. Here are examples.
Government bond yields are so close to their lower bounds that they are unlikely to provide the returns of the past, nor act as a counter to falling equity markets. What are the investment choices?
The signs are that bond yields could stay low for a long time. This has important implications for future returns, but are we heading for the Big Bang, the Big Crunch or the Steady State?
Going back to June 2019, investors would have questioned the logic of diversifying away from outperforming growth assets. But when markets feel at their best, it is paramount to keep a perspective on long-term goals.
Falling dividends and the uncertain outlook deliver challenges for income generation, but a dual approach of short-term income and long-term sustainability should ensure a portfolio continues to perform.
Do you think investors can only lose heavily on bonds if the credit defaults? When bondholders accept 0.88% for 100 years, there is great potential for serious pain somewhere along the journey.
Investors who stick with the same asset allocations as in the past will likely fall short of their goals. The 'right' allocation is personal and holding more equities depends on risk capacity.
There are heavy clouds on the horizon in the near and medium term, yet risk markets have separated themselves from the economics. Liquidity will not solve the problems of bankrupt companies.
Investors hold non-government bonds for both their income and defensive characteristics, but there must be sufficient diversification and liquidity in quality names to manage the risk.
The Retirement Income Review goes much further than an innocent-sounding 'fact base', and is sure to guide policies in the run up to the next election. It will change how we think about retirement incomes.
Company profits have not improved for many years but higher valuations have been driven by falling rates and excess liquidity. Conditions do not suit a value and contrarian manager but here are some opportunities.
The Review includes some profound findings, most notable that retirement income should include drawing down far more capital. Expect post-retirement products to proliferate under a Retirement Income Covenant.
A mid-pandemic survey of over 1,000 people near or in retirement found three in four are not confident how long their money will last. Only 18% felt their money was safe during a strong economic downturn.
Banks severely cut dividends in 2020 but are expected to improve payments in 2021. History provides clues to when the banks will return to their 2019 levels of profitability, but who is positioned the best?
It's not only that 60 is the new 40, but 80 is the new 60. Many Baby Boomers spend up in retirement and are less inclined to leave a nest egg to their children. The ways wealth transfers will affect all investors.