Buying into dividends. For steady, regular income.

Turbulent times in the markets are a challenge for investors. Risks must be assumed in order to obtain positive yields and dividends. Investors can benefit twofold by selecting products and fund solutions with a focus on payout in line with their own investment strategy.

Changing investment strategies in a volatile market environment?

The new financial year got off to a promising start – until the composure of the markets was abruptly shattered by the global spread of COVID-19. Investors face a tough decision over how to proceed in these turbulent times. Should they do nothing and hold off, liquidate their assets, or perhaps make new investments?

Investors have to assume more risks for positive yields

Many can still remember the days when you could generate steady income on a savings account or through government bonds without having to take on substantial risks. The situation has now changed fundamentally. Lucrative returns on money market investments are a thing of the past. Against a backdrop of a persistently low (or even negative) interest rate environment, investors nowadays are increasingly forced to accept risk if they want to generate positive returns and satisfactory income streams.

Investors who keep their stakes in the equity market can benefit from the unique opportunities available right now. After all, equities are still attractive as compared to other asset classes. In investment portfolios too, finding an optimal balance is important, particularly in times like these.

Past investment strategies no longer ensure return

Comparison of risk/return in the past market settings and in today's low-interest environment

Source: F&W «Stabile, regelmässige Erträge in sich veränderndem Marktumfeld», ["Stable, regular returns in a changing market environment"] 11.9.2019

Using diversification to shore up returns

The question therefore is how investors can "have their cake and eat it, too" – in the sense of being invested for the long term on the one hand, while benefiting from regular income streams in the form of distributions on the other. All this without neglecting the importance of diversification in the overall portfolio, because the best form of protection, especially in a difficult market environment, is to diversification of the overall portfolio across a variety of asset classes. In addition to helping to smooth portfolio performance and reduce losses during times of crisis, diversification also improves the chances of any underperformance of the overall market being more rapidly reversed.

Using regular dividends to supplement income

Against this backdrop, diversified asset management solutions with income-generating potential – such as structured products with their "open end" represent a robust investment opportunity in the current, challenging market environment. As an alternative to pure equity/bond solutions with dividend/coupon payments, combined solutions and products also benefit from high option premiums in the current volatile markets. They generate supplemental income through regular dividends and thus provide additional financial security. Whether the aim is to put your mind at ease in your twilight years, to simply treat yourself for once, or to be ready for unforeseen investments, dividend strategies can help you achieve your particular goals.

Do you have any questions on this topic?

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