KEY THINGS TO KNOW ABOUT INCOME INVESTING

The global stock market has staged a rebound through 2019 with the MSCI World Index posting a 13% increase2 as of 10 May, compared to a 10% decline last year. But recent tweets by US President Donald Trump threatening to raise tariffs on Chinese exports escalated tensions between Beijing and Washington, and rattled global financial markets.

With market conditions changing rapidly, are you on an emotional roller-coaster as you worry about coping with increased market volatility, or missing out any potential investment opportunities?

Instead of trying to “time” and second-guess the market (both of which rarely work), a multi-asset income strategy1 could be an option that can help you sail through unstable markets.

Do you face these challenges?

Amid uncertain market conditions, investors generally have three key concerns in mind:

  1. Volatility in the bond and equities markets
  2. Single-country political and economic risks
  3. Difficulty in predicting the rise and fall of the US dollar

The market environment can be seen as one where there are risks but also opportunities. Through a multi-asset income strategy, investors could dynamically allocate the assets to achieve their income objectives while being better positioned to manage volatility.

How a multi-asset income strategy1 can help

A multi-asset income strategy seeks to provide regular income3 by investing in a range of income-generating securities including equities, bonds, preferred equities, convertible bonds, and real estate investment trusts.

Together with a flexible and dynamic approach that invests across regions, asset classes and the full capital structure, this could help investors capture investment opportunities and be better positioned to manage volatility in different market conditions.

Challenges Investors can consider
  1. Volatility in the bond and equities markets
  • Dynamic allocation in multiple asset classes that have different correlations so that the portfolio is less likely to be impacted by a single risk factor
  • Investing in a pool of income-generating assets3 (such as dividends from stocks and coupons from fixed income) to smoothen total returns and cushion off impact from fluctuations in capital gains
  1. Single-country political and economic risks
  • Diversifying4 globally and across asset classes that have different correlations to each other to mitigate overall risk
  1. Difficulty in predicting the rise and fall of the US dollar
  • Hedging of currency exposures

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