Searching for Income
With interest rates at record lows and valuations lower on most equity portfolios by around 25% over the last two years investors have had to increase risk to generate a decent income.
We have had a reduction in values across property, bonds, equities and cash. Investors wanting a high and growing income used to stay put in UK blue chips but all has changed. Investing globally may be the best way to tackle the unique economic and financial crisis we find ourselves.
Investors come to us looking for a reliable alternative source of income as a result of the unpredictable economic environment and very low interest rates.
The search is on for yield, this may mean moving from fixed interest to equity income. This needs a longer term strategy maybe ten or twenty years which with most of us now living well into the our eighties, we may well have time on our hands anyway.
New funds are able hoping to deliver this income requirement, from a range of global equities, similar to what the UK blue chips did in the past, that is provide a high and sustainable income yield as well as capital growth over the long-term.
Income levels of 4-5% is normally ideal for investors and this is being delivered now.
One strategy has worked and that is a two part discipline; first of all look for trends in markets and economies and find companies that benefit from them, secondly buy companies that yield over 25% of the FTSE Worldwide Index.
Investing in companies that pay significant cash dividends tend to be well managed companies. Also they are looking for companies that are not dependent on dynamic global economic recovery. Companies with low levels of debt that meet these criteria may not be found in the developed world.
Countries with a young population in developing economies could be in far better shape than ours and be likely to benefit from the current climate.
With Interest rates to continue to be low for the foreseeable future taking a calculate risk by investing globally for income is perhaps over the long-term the way forward.
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I have recently retired.would welcome a review and look at ways of improving income position using some of my savings.
Both the UK and America have too much debt and the these new world economies will be the new super powers in 20 years. America has only 300 million population. China and India have the advantage of millions young willing workers.
Our work force is getting older and I do not envy those starting work now as they will need to support the State Pension system for a long time.
By Jo in Govan at 6:26 pm on Nov 11, 2009
I gather there are no guarantees with this income product you mention.But can you email me details, thanks.
By Oliver Smillie at 6:29 pm on Nov 11, 2009