asseet allocation

Asset allocation in an uncertain market

Asset allocation is an ongoing process and is particularly important in times of market uncertainty.  I continue to evaluate the market with a view to understanding the position of the market and always ask the question, “how will any change in the market affect my assets and my income”

This question is very significant now at a time when all major world markets are showing bearish divergences suggesting that there the probability of a significant market correction.  With the risk of market volatility and potential capital loss, an investor must ask “what proportion of my assets should be in equities and how much in more defensive securities?”

Given my assessment of current market risk, I have reduced my exposure to stocks to about 15% with the remainder in “fixed interest” securities.  With the interest rates in Australia now very low, corporate bonds are attractive with yields… Continue reading

How do I invest in an uncertain environment?

The investment environment has probably never been so uncertain, particularly for the retiree who is dependent on income and capital preservation.   In a world of very low interest rates, many uncertainties and continued obsessive money printing by central banks, investing is a real challenge.

I need an adequate return with security of capital.  So what is an adequate return?  I aim at a minimum return of 5% above the rate of inflation.  The current rate of inflation is said to be running at 2.7% but the inflation rate differs from person to person. As a self-funded retiree, facing a falling AUD my major costs are overseas travel (while not ignoring health and food) and my rate of inflation is at least 4%.  So I need to aim for a 9% return with a fair margin of safely.

Fixed interest securities offer lower risk but… Continue reading

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