Following their 30-year downward trend, despite the recent hike in government bonds, interest rates remain close to their historic lows. At the same time, inflation rates in many industrialized nations are slightly above the yields on 10-year government bonds – and are rising. This is gradually leading to an erosion of assets for traditional fixed income portfolios. Investors would therefore be well advised to widen their investment spectrum.
A promising approach entails utilizing various sources of return without restricting yourself to a specific investment segment in the process. Credit strategies offer a yield pickup relative to first-class government bonds. High-yield and emerging market bonds in turn offer a higher coupon as well as a corresponding loss buffer against rising interest rates.
A further recurring income flow comes from equities with high dividends. In the past, the relatively low-risk business models of first-class dividend-paying companies ensured that equity prices corrected less sharply than the overall market during general weak phases. Furthermore, dividend champions can also generate an above-average return over the long term. Dividends account for the major part of the overall performance of equities and they are also an important indicator of a company’s financial strength.
Investment solutions for the current market conditions
Global, mixed investment solutions that, in addition to traditional bonds, also permit other asset classes with high regular returns can help investors to counter the negative effects of the low interest rate environment and lead to a significant improvement in the return generated by their investments.