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Portfolio Manager at Lazard Asset Management, Aaron Binstead, joins host Grace Ormsby in this episode of the nestegg podcast to dissect Australia’s current ‘soft’ financial climate, and why defensive investing could be the right strategy for a multitude of investors.

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Aaron defines defensive investing comparing it to conservative investment options, analyses the types of investors who should be considering it as an investment strategy, and provides examples of industries where Lazard Asset Management predict growth for investors – also delving into the criteria they assess investments against.

With diversification an important part of a thriving investment portfolio, Aaron reveals some of the diversification mistakes that investors make, what SMSF investors should consider when selecting investment opportunities, and how investment decisions can impact an individual’s portfolio.

Thanks Aaron, for sharing your insights with the Nest Egg podcast team!

You can keep up to date with what Aaron is up to HERE

Have an investment story to share? Get in touch at [email protected] and you might get featured on the next episode.

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Wednesday, 23 October 2019

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Retirement

Wealth tips for a low interest economy

By Killian Plastow · August 02 2017

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Retirement

Wealth tips for a low interest economy

By Killian Plastow
August 02 2017

Reading:

Dixon Advisory, Ishara Rupasinghe, Reserve Bank of Australia, RBA, interest rates, low interest rates, wealth tips, wealth management, retirement planning, retirement savings, investing tips, household debt

Wealth tips for a low interest economy

By Killian Plastow · August 02 2017

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Low interest rates can impact the performance of an investment portfolio, and with Australian rate hikes unlikely for the next year, investors will need to be savvy to make the most of the current environment.

The Reserve Bank of Australia announced on 1 August that it would be holding rates steady at 1.5 per cent, marking the 11th consecutive month with no change.

Ishara Rupasinghe, a senior strategy adviser with Dixon Advisory, explained that the RBA “would need to see a lot more pick up” in economic indicators such as wage growth and inflation before they chose to lift rates, and this is unlikely in the next 12 months.

This can pose a risk for Australian retirees, as they may find themselves drawing a pension from their capital rather than income generated from their portfolio given the potential for lower returns, Ms Rupasinghe said.

However, Ms Rupasinghe cautioned that trying to combat this by seeking out better returning investments can also present risks to investors.

“What people need to be really careful about is not chasing returns at the cost of too much risk,” she said. “This can increase volatility in their portfolios.”

Ms Rupasinghe gave four tips to help Australians avoid being caught out by low interest rates.

Hold some cash

Having access to cash is “very important”, Ms Rupasinghe said, and even though interest rates are presently low, there is no reason for investors not to make sure they have an adequate cash supply.

“You need to have cash for day-to-day living expense and emergency reserves," said the adviser. "It also gives you the ability to take up new investment opportunities if they arise.”

Look beyond income

When assessing your portfolio, it’s important to consider total returns and not fixate purely on the income it generates, and things like capital growth should be factored in as well.

Diversification is important

“There is more to investing than just cash and Australian equities,” Ms Rupasinghe added.

Not all assets are driven by interest rates, and many will enjoy good performance at the same time as others underperform; meaning, investors looking to make decent returns through times of low interest rates should look to other types of assets for new opportunities.

Borrowers beware

Low interest rates can be great for borrowers, but taking on too much debt could spell disaster down the road when interest rates begin to climb, Ms Rupasinghe said.

Interest rates may look low for the next year, but borrowers need to consider the length of their loan, as home loans will often be a 20–30-year-long commitment.