- In today’s low-yield landscape, income investors find themselves depending on higher-yielding investments such as bank loans, high-yield bonds and dividend-paying equities.
- Reaching for yield can be especially dangerous for income investors because of sequence risk - the risk of a significant drawdown within 10 years of retirement.
- Investing in a strategy like this - combining global high-yield, emerging-market debt, securitized credit, and bank loans - gives investors a much broader set of opportunities to generate excess income and alpha.
- Income investors who want more growth potential might consider bringing stocks into the mix. However, a traditional equity allocation lowers a portfolio's yield and increases risk in exchange for that growth.
For further details see:
Tackling The Income Problem