Where to find monthly income and healthy returns without ratcheting up your risk
The risk of your fixed-income portfolio is currently around double what it was 10 years ago, at the same time as bond yields remain depressed – not a good combination.
And the picture doesn’t get much better when weighed against the local backdrop, though the Reserve Bank of Australia has indicated it will continue with its plan to start tapering bond-buying.
Although Governor Lowe and the RBA have explicitly stated that official cash rates won’t move until 2024, the market is already pricing that movement into bond markets - that interest rates will be markedly above the current 10 basis points.
But, as I explain in the video below, some pockets of the corporate credit universe do offer minimal risk and reasonable returns without forcing you to lock your money away for years, shift into higher-risk short-duration bonds, or even increase your equity exposure.
Where can risk-averse investors look?
In the following interview, I outline the distinctions between different credit assets – particularly floating-rate notes, fixed-rate notes, and term deposits – and detail which of them are best suited to the current market environment.
We actively seek to invest in interest-bearing investments of high credit quality, rather than investing in a predetermined basket of securities such as an index. For further information on the Floating Rate Fund, please visit our website.
MORE ON Fixed Income
Simon is Head of Australian Cash and Bonds in the Cash and Fixed Income Group. He is responsible for the management of index cash funds, stock lending collateral and domestic bond strategies in Australia.