At the moment, every week that you are invested in cash, the value of your investment is being eroded by inflation.
1. Invest in actively managed, higher-yielding fixed income
Investors can meaningfully increase returns with some additional risk by allocating part of their cash portfolios to fixed income investments.
2. Consider increasing your allocation to growth assets
3. Review your retirement target date
4. Make additional super contributions
5. Talk to your adviser about overcoming the challenges of low rates
Top tips for investing in a low rate environment
- Re-allocate some cash to actively managed, higher-yielding fixed-income funds for some additional risk.
- If retirement is still some years away, consider increasing your allocation to growth assets which offer a higher return potential for higher risk.
- Review whether your retirement target date is still a good fit for you. If you’re thinking of working longer, that extra time will give you an advantage.
- Making additional super contributions can offset the drag caused by low rates. Tax incentives may be available.
- Your adviser can help you review how your retirement plans have been impacted by low rates and propose strategies to combat them.
[1] Inflation in Australia is measured by the Australian Bureau of Statistics. The Consumer Price Index for the 12 months to December 2020 rose 0.90% - nine times higher than the official interest rate of 0.10%.
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This material has been issued by Schroder Investment Management Australia Limited (ABN 22 000 443 274, AFSL 226473) (Schroders) for information purposes only. It is intended solely for professional investors and financial advisers and is not suitable for distribution to retail clients. The views and opinions contained herein are those of the authors as at the date of publication and are subject to change due to market and other conditions. Such views and opinions may not necessarily represent those expressed or reflected in other Schroders communications, strategies or funds. The information contained is general information only and does not take into account your objectives, financial situation or needs. Schroders does not give any warranty as to the accuracy, reliability or completeness of information which is contained in this material. Except insofar as liability under any statute cannot be excluded, Schroders and its directors, employees, consultants or any company in the Schroders Group do not accept any liability (whether arising in contract, in tort or negligence or otherwise) for any error or omission in this material or for any resulting loss or damage (whether direct, indirect, consequential or otherwise) suffered by the recipient of this material or any other person. This material is not intended to provide, and should not be relied on for, accounting, legal or tax advice. Any references to securities, sectors, regions and/or countries are for illustrative purposes only. You should note that past performance is not a reliable indicator of future performance. Schroders may record and monitor telephone calls for security, training and compliance purposes.
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