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Thursday, 28 October 2021
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High-yield bonds carry more risk than investment grade but they offer higher income returns. An allocation to high-yield bonds in a portfolio - alongside equities and other bonds – is worth considering.
Most of us try a version of tactical asset allocation. The good news is the range of investments available has improved significantly, and anyone can become a version of the Future Fund or Jerome Powell.
The case for strong stock markets is convincing. The problem is that the case for a major correction (20% or more) in the next 12 months is also convincing. And why Bitcoin is absurd and defies logic in a market bubble.
The traditional 60/40 portfolio might deliver only 1.5% above inflation in future without diversification benefits. Knowing an asset’s attributes rather than arbitrary definitions is better for investors.
A comprehensive study of the impact of inflation on returns from different assets over the past 120 years. The high returns in recent years are due to low inflation and falling rates but this ‘sweet spot’ is ending.
Long duration assets such as government bonds and property have benefitted from falling interest rates, but a turn is coming. It's time to find assets that may benefit from rising rates, such as private debt.
With term deposits offering tiny returns, investors are looking for reliable sources of income and capital stability. Combining over 100 loans into a fund provides more diversification than buying a single corporate bond.
Conservative investors are forced to choose between protecting capital and accepting lower income while drawing down capital to maintain living standards or taking additional risk. How can you strike a balance?
Australia’s economic recovery is expected to be strong in 2021. It may appear the local economy is lagging other countries as they recover but that is only because we are not starting from such a low base.
Equity valuations are lofty, but long bond rates have now returned to levels before the pandemic crisis. In a balanced portfolio, long bonds now provide more opportunity to cushion the volatility of equities.
In investing, income and capital gains are akin to scoring goals, but successful teams must also stop the other side from scoring. Most portfolios need a manager preserving capital and reducing drawdowns.
Warren Buffett's investment portfolio gains attention because of his legendary status, but parts of his empire in insurance, railways, metalworking and aircraft suppliers have been damaged by the pandemic.
We tend to forget that house prices often fall. Direct lending controls are more effective than rate rises because macroprudential limits affect the volume of money for housing leaving business rates untouched.
The survey drew a fantastic 2,000 responses with over 1,000 comments and polar opposite views on what is good policy. Do most people believe the home should be in the age pension asset test, and what do they say?
Any policy decision needs to recognise who is affected by a change. It pays to check the data on who pays taxes, who owns assets and who earns the income to ensure an equitable and efficient outcome.
With articles on the pensions assets test read about 40,000 times, 3,500 survey responses and thousands of comments, there was a lot of great reader participation. A few comments added extra insights.
It is hard to think of any area of widespread public concern where the same policies have been pursued for so long, in the face of such incontrovertible evidence that they have failed to achieve their objectives.
There are reasons to believe inflation will stay under control, and although we may see a slowing in the global economy, two companies should benefit from the themes of 'Stable Compounders' and 'Structural Winners'.