How to build a bulletproof income portfolio
This is, without doubt, one of the most common challenges facing many Livewire readers today and is a topic that comes up repeatedly. At the core of the issue is the simple fact that record low-interest rates mean the returns from many income-generating assets are too skinny to live off.
For many of our readers, the solution has been to increase their exposure to equities and harvest the dividends provided by blue-chip stocks on the ASX. Healthy yields coupled with the tax benefits of Australia's franking system and throw in some capital gains – it has been a winning strategy.
However, some issues are causing our income-thirsty investors some angst. Firstly, dividend and capital values of traditional blue chips are under threat. Telstra and National Australia Bank are prime examples of blue chips that have suffered falling dividends and declining share prices over recent years.
These might seem like isolated examples. However, the shortcomings of using equities as a sole source of income are highlighted when you consider how concentrated the local market is.
Four banks (ANZ, CBA, WBC, NAB), a miner (BHP) and a telco (TLS) represent nearly half of the total gross dividend income for the ASX200.
(Source: Plato Investment Management)
Labor's proposal to scrap cash refunds for excess dividend imputation credits has been an added source of concern, particularly for a segment of self-funded retirees. While the policy is now unlikely to ever see the light of day, it serves as a reminder of how policy change can interfere with retirement plans.
Against this backdrop it seems like an eminently sensible idea to review the broader landscape of income-generating asset classes available to investors.
Livewire has invited a panel of investment professionals to answer our questions about the ‘state of play’ and opportunity in eleven different income generating asset classes. The submissions, which have been produced exclusively for Livewire readers, come from Livewire contributing fund managers and will be published via this website in the coming weeks.
At the conclusion of the series, I will host a live webinar with two independent wealth professionals, discussing how they combine these building blocks to create diversified income strategies. The webinar is free for Livewire members, register on the link below this article, and I will send you the details in advance.
This series is a learning process for me, and I hope our readers will also benefit from learning about some lesser known asset classes.
The first article will be published on Livewire on Thursday, and we've created a link (VIEW LINK) where all the content will be appear as the series rolls out.
Below is an overview of what is coming up and I’d like to thank all the contributing fund managers for taking the time to prepare their submissions.
Coming up in the Livewire Income Series 2019
Pros, cons and return ranges for each asset class, by Martin Ryan, The Yield Report
Australian Equity Income, by Michael O'Neill, Investors Mutual
Global Fixed Income, by Robert Mead, PIMCO
Australian Government Bonds, by Paul Chin, Jamieson Coote Bonds
Hybrids, by Christopher Joye, Coolabah Capital
Investment Grade and High Yield Credit, by Matt Reynolds, Capital Group
Residential Mortgage Backed Securities, by John Sorrell, Nikko Asset Management
International Equity Income, by Dan Pennell, Plato Investment Management
Unlisted Real Estate, by David Rogers, Fort Street Real Estate (Walsh & Co)
Real Estate Loans, by Tim Johansen, Qualitas
Real Estate Investment Trusts, by Pete Morrissey, APN Property Group
Corporate Loans, by Andrew Lockhart, Metrics
Register here for the webinar: http://livewiremarkets-income-series-2019-webinar.pagedemo.co/
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