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Retirees should focus on income, not index
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Investors approaching retirement would be best served discarding their preconceptions about portfolio construction and index performance and instead focusing on income requirements, according to Aberdeen Asset Management.
The global financial crisis showed us that being too skewed towards growth assets could be dangerous for people who have less time to recover, such as those approaching retirement, according to Aberdeen Asset Management senior investment specialist Leanne Bradley.
“At Aberdeen, within each of the asset classes we manage, we are benchmark aware — but not benchmark driven,” she said.
“We firmly believe that a strategy combining income-producing assets and growth asset classes with an objective-based outcome produces a superior result,” Bradley said
She said this type of strategy could deliver liquidity, a regular stable income, growth to keep pace with inflation and some downside protection.
“If we return to the essential precepts of investing, and take the retirement investor’s needs as the starting point, what we are looking at is creating a balanced, diversified portfolio which pays above the RBA cash rate while also offering some growth to keep pace with inflation,” Bradley said.
“Income consistency is also important, so you are looking for something with a regular stable income to give investors some income certainty.”
Aberdeen’s Multi-Asset Income Fund offers a set distribution rate each month determined at the start of each financial year. It currently aims to pay an annual net yield of 5.5 per cent.
AUTHOR
Mike Taylor
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