Since the Covid-19 pandemic spurred frenetic volatility in markets, and in the year or two that has followed, markets have seen rising economic and geopolitical instability create ripples across every asset class. At M&G Investments, we believe adopting a flexible investing mindset is increasingly critical for investors seeking stable, diversified income.
The flexible investing mindset
It is a cliché of the financial news that investors crave certainty, yet it is clear to anyone with even a superficial understanding of markets that they are anything but predictable. So, rather than fearing volatility, mathematician John Allen Paulos was on-point when he wrote that “uncertainty is the only certainty there is, and knowing how to live with insecurity is the only security.”
Investors who embrace volatility, buying on the dips, understand this. As do income investors who adopt a flexible diversified approach and avoid focusing on a specific instrument or area of fixed income. Combining a range of income instruments in one portfolio can help secure a regular and relatively smooth stream of income.
A perspective from multi-asset and equities: Look beyond cash
Right now, in Asia, a lot of investors are hooked on both the cash deposit and term deposit rate. As the yield curve normalises and rates change, investors will have to start thinking about long-term plans for generating income. So, they’ll be looking to invest in assets for the next five to 10 years in an environment, which is likely to be more cyclical than we saw in the post-global financial crisis (GFC) period. There is a wide choice of uncorrelated instruments, including fixed income, equity income, and infrastructure income. Furthermore, there are many sectors within these asset classes, each with their own individual characteristics.
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“Widening your investment universe beyond bonds allows investors to balance income and growth of capital in a diversified manner, throughout market cycles”.
Michael Dyer, Investment Director of Multi Asset and Equities |
A perspective from fixed income: Bonds are back
For a while there, fixed income was an asset class that was barely providing any income. If an investor wanted to generate income let alone total return, typically it would be difficult to achieve that by investing in bonds.
The good news is: bonds are back – and they do fulfill that role once again! At M&G, we built an experienced and collegiate fixed income team. We offer some innovative solutions on instruments such as multi-sector, inflation -linked and floating-rate bonds. These are not just attractive in terms of income, but have the potential to offer attractive long term returns as well.
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“Within fixed income, investors can combine sovereign and corporate bonds from developed and emerging economies, as well as have a mix of investment-grade and high-yield bonds, as well as floating-rate bonds.”
Pierre Chartres, Investment Director of Fixed Income |
How flexibility supports an income portfolio across market cycles
Income investors have experienced a turbulent journey over the past 20-years. We’ve seen the global financial crisis, the eurozone sovereign debt crisis, the global pandemic, and the implementation of extraordinary monetary policies that caused interest rates to hit the floor. Can anyone honestly say the next 20 years won’t be just as unpredictable? Crises blow out of nowhere, so there isn’t even much value in trying to predict what they will be. The only way to prepare is to take a flexible approach, with exposure to a diverse range of instruments whose movements can offset each other and so offer protection – and security – if the ride proves just as wild in the coming year and the decades ahead as it has in the past.
Adopting a flexible approach to income may deliver some big benefits to your portfolio, including:
For most investors, researching and selecting individual instruments or asset classes is time-consuming and different to manage. That’s where M&G Investments’ suite of income solutions comes in. Since 1931, we are a leading asset management company with a long-term outlook and a history of innovation. Our expertise spans multiple markets, sectors, and asset classes to deliver constant innovation across our comprehensive range of income strategies, from fixed income to equity income and infrastructure investing.
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To find out more on our income strategies, contact M&G Investments at [email protected]. |
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| For Hong Kong readers, click here | For Singapore readers, click here |
Disclaimer:
The value of a fund’s assets will go down as well as up. This will cause the value of your investment to fall as well as rise and you may get back less than you originally invested. Past performance is not a guide to future performance. The views expressed in this document should not be taken as a recommendation, advice or forecast.
For Institutional Investors and Accredited Investors in Singapore and Professional Investors in Hong Kong only. Not for onward distribution. No other persons should rely on any information contained within.
In Hong Kong, this financial promotion is issued by M&G Investments (Hong Kong) Limited. Office: Unit 1002, LHT Tower, 31 Queen’s Road Central, Hong Kong, and in Singapore, by M&G Investments (Singapore) Pte. Ltd. (Co. Reg. No. 201131425R), regulated by the Monetary Authority of Singapore. All forms of investments carry risks. Such investments may not be suitable for everyone. The information contained herein is provided for information purposes only and does not constitute an offer of, or solicitation for, a purchase or sale of any investment product or class of investment products, and should not be relied upon as financial advice. For Hong Kong only: If you have any questions about this financial promotion please contact M&G Investments (Hong Kong) Limited. The contents of this document have not been reviewed by any regulatory authority in Hong Kong or Singapore.
