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With the Olympics starting this week, AMP Capital is forecasting its gold, silver and bronze-medal winning investments in this low interest rate environment.
In line with AMP Capital’s forecasts, the Reserve Bank of Australia has dropped the official cash rate by 25 basis points to 1.5 per cent, which is a new Australian record low.
AMP Capital Director of Australia and New Zealand Craig Keary said: “Just as elite athletes review their preparation to ensure they’re on track to achieve their sporting goals, investors should also monitor their portfolio to ensure they are fully fit for achieving their lifestyle and retirement objectives.
“If you’re invested in cash but your goal is to achieve a consistent level of income then you may find this latest rate cut puts you off the pace when it comes to achieving that goal. You may want to consider whether a revised investment strategy may be better tuned to the current environment.
“In the spirit of the Olympics, we have identified three investments that may help investors get to the finish line more efficiently. Investors should also consider whether they need to call upon the expertise of a coach – otherwise known as a financial adviser – to help them identify an investment strategy that will best suit their situation and help them deal with any setbacks along the course.”
The three asset classes on AMP Capital’s podium for success in achieving returns in a low interest rate environment are as follows.
Gold! Multi asset
Multi-asset investments work on the premise that risk can be reduced by combining asset classes that have a low correlation with each other. Investing in assets that are influenced by different return drivers, or which access unique sources of return, can further enhance the degree of diversification in a portfolio. The funds also have a flexible game plan that can work in different match conditions. Multi-asset funds are designed to deliver steady returns, growing faster than the cost of living, while protecting against market volatility. They are particularly suited to retirees who don’t have the capacity to experience a sharp decline in wealth.
Infrastructure offers investors the opportunity to own the utilities and facilities that provide essential services and help drive economic growth and productivity. From an investment perspective, direct infrastructure typically performs well in volatile and uncertain markets while listed infrastructure offers investors liquidity. Investors in the asset class benefit from attractive risk-adjusted returns; reliable inflation-linked income; stable long-term yields, with the potential for capital growth; and defensive characteristics emanating from the provision of essential services.
Bronze! Australian equities
Australian equities offer the potential to provide higher returns over the long term as well as attractive income through dividends that provide additional tax benefits. This is beneficial for investors looking for income that grows over time to help meet their essential living needs. Investing in an Australian equities income-focused managed fund may appeal to investors with a preference for a higher, more consistent income stream and a lower tolerance for capital volatility than they would achieve by investing in the broader equity market.
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This article has been prepared to provide general information and does not constitute 'financial advice' for the purposes of the Financial Advisors Act 2008 (Act). An individual investor should, before making any investment decisions, consider the information available in the relevant Product Disclosure Statement and seek professional advice. While every care has been taken in the preparation of this document, AMP Capital Investors (New Zealand) Limited and the AMP Group (together, 'AMP') make no guarantee that the information supplied is accurate, complete or timely and do not make any warranties or representations in respect of results gained from its use. The information is not intended to infer that current or past returns are indicative of future returns. The views expressed are those of the author and do not necessarily reflect those of AMP. These views are subject to change depending on market conditions and other factors.