Income-generating assets for more resilient portfolios

The assets that they generate income can mitigate risks and make the more resilient portfolios in all economic cycles. Equity, bond and multi-asset investments to get a stable income. From 1995 to the present, the cumulative US dollar inflation rate has been close to 100%. Anyone who started saving a dollar in 1995 and wanted to match or beat inflation would need at least $2 today. This means that, within a generation, purchasing power has also been halved.

Mitigate portfolio risks

He writes it Alex SmithHead of Equities Investment Specialists – Asia Pacific by abrdn stressing that “a good way to mitigate inflation would be to invest in assets that provide a steady stream of income. Stocks, bonds and multi-assets can constitute great opportunities income generation. These are tools that offer regular payments that can keep pace with inflation rates or even exceed them, helping to preserve purchasing power over time, even if the level of income is not guaranteed.”

It is also worth – continues the expert – “to maintain the own investments in the long run period. In fact, an investor who invested $10,000 in the S&P 500 index about 20 years ago would end up with about $65,000 today. If he had missed only the 10 best days, his returns would have more than halved to around USD 30,000.”

By keeping your investments in income-generating tools, you don't get lost nor the best trading days, nor the income generated during the investment period.

with income generating assets

By diversifying income investments across sectors and asset classes, “it's possible further reduce risk by spreading exposure and improving portfolio resilience and returns. Diversified cash flow can act as a buffer during market ups and downs, as well as reduce vulnerability to sector downturns. Since fixed income is attractively priced, the asset class will likely offer positive returns when equities are sold off at the end of this cycle,” Smith further writes.

In 2024a focused approach on generating high income it could be “the most attractive option on the equity front, given that the US Federal Reserve is expected to cut rates. On the fixed income side, credit markets rallied sharply on anticipation of monetary easing. With Treasuries still yielding above 5%, a portfolio of safe issuers with investment grade ratings currently earns returns well above inflation.”

Adding a selection of to the mix debt issuers high yield and emerging markets “represents an attractive proposition in the current environment. Our presence in global fixed income allows us to consistently select the best ideas in any market. In terms of multi-asset allocations, the strategy would target dynamic asset allocation, diversification and a stable income outcome.”

Increase returns: increase revenues with appropriate strategies

When it comes to stocks, investors who wait get the best results. We believe strong secular trends, such as artificial intelligence and the broader technological revolution, will drive stock appreciation over the long term as companies grow their earnings. Dividend capture also improves yield. This is an innovative but simple approach. We identify dividend events for companies with strong fundamentals and work on those events to increase yield.

In the fixed incomeThe credit spreads e changes in the risk-free rate determine the total return of bond portfolios. In 2024, total returns will likely be supported by monetary easing, rather than tightening credit spreads. Yield curves remain inverted, making short-dated bonds an attractive investment, particularly for investors who are risk-conscious and not investing in high-yield bonds in the current economic climate.

Fundamental diversification

There diversification – concludes the expert – “would be, also crucial for multi-asset portfolios. An optimal strategy would be to invest in a broad range of income generating assets across traditional and listed alternative asset classes. Many of these assets in fact offer a stable and de-correlated income, less influenced by market conditions. If mixed carefully, these tools can help build resilient portfolios that generate more stable and consistent income margins for capital growth”.