Rethink your income strategy

What you need to know:
2Q 2017

Rates are expected to remain at historically low levels

Despite any near-term hikes, rates are expected to remain at historically low levels for quite some time.

Some investors move to risk, others to cash

Some investors have moved into riskier assets, while others have been clinging to cash.

Rethink income strategies to diversify portfolio

Investors need to rethink their strategies and diversify their portfolios to align with their income goals.

What’s happening:
Investors’ income goals are at risk.

Rates have been low for a very long time. But the need for income doesn’t go away. Many investors have resorted to strategies that are likely to result in more risk and less reward in the long run. There may be better ways to pursue your goals. What's your objective?

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Seek consistent income

Seek consistent income.

The scarcity of decent yields has driven determined income-seekers into fewer, more highly correlated asset classes. These portfolios can lack diversification, which is especially risky as volatility is expected to rise in 2017.

Investors are taking substantially more risk to earn the same income1

Income portfolios have become much riskier

Performance data quoted represents past performance and is no guarantee of future results. Index performance is shown for illustrative purposes only. It is not possible to invest directly in an index.

Higher yields

Seek higher yields.

Many ultra yield-seekers have over-reached without realizing how risky some income-generating assets have become.

Higher risk where you wouldn’t expect it2
Asset classes once considered “safe” have recently exhibited significant volatility and drawdowns.

Asset classes once considered safe

Performance data quoted represents past performance and is no guarantee of future results. Index performance is shown for illustrative purposes only. It is not possible to invest directly in an index.

Preserve capital

Preserve capital

Clinging to cash can be risky, especially in a reflationary environment. The rate of inflation has been picking up and is expected to continue rising. Earning next to nothing on a cash-laden portfolio can have a major impact on purchasing power.

Cash is not king3
Effect of inflation on average annual total returns over the last 25 years

Cash is not king

Performance data quoted represents past performance and is no guarantee of future results. Index performance is shown for illustrative purposes only It is not possible to invest directly in an index.

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