Fixed Income
The key to success is to have a well-diversified portfolio that takes into account your individual needs and objectives. You should also seek out investments with attractive yields and favorable credit ratings. Additionally, it’s important to stay informed of the latest developments in the fixed income market, including changes in interest rates and default rates.
We focus on delivering attractive risk-adjusted returns by actively managing our portfolios and taking advantage of opportunities in the market. We also provide our clients with access to a variety of passive strategies that aim to track the performance of specific indices.
Why an active approach?
An active investment approach involves taking a more hands-on approach to managing your investments. This means researching, selecting, and actively managing the investments in your portfolio. This can include regularly rebalancing your portfolio to ensure it remains in line with your goals, monitoring performance, and making changes as necessary. Active investors also look for opportunities to take advantage of market conditions or new investment products.
The key difference between active and passive investing is that active investors take an active role in managing their portfolios while passive investors simply buy and hold their investments for the long term without making any changes.
Bonds are a significant and essential financial tool, offering a balanced approach to managing risk and ensuring stability within your investment portfolio.
Bonds
Fixed income securities, commonly known as bonds, are debt instruments issued by the Australian government or corporations to raise capital. When you purchase a bond, you’re essentially lending money to the issuer, who, in return, pays you a fixed rate of interest over a specified period, often several years. At the end of this term, you’ll receive your initial investment back, known as the principal. This arrangement provides a predictable income stream, making bonds an attractive option for many Australian investors seeking stability in their portfolios.
Bonds also play a crucial role in diversifying investments within your portfolio, helping to reduce risk by balancing out the volatility of stocks and other assets. By including bonds from various sectors, industries, and even different regions, you can spread out your risk and potentially enhance your returns. Additionally, while bonds may lose value during periods of rising inflation, they still provide consistent interest payments, acting as a hedge against inflationary pressures.
Advantages
of bonds
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Security
Investing in bonds offers assurance that the full amount of money loaned out will be paid back completely when the loan matures.
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Regular Income
People who require consistent returns, such as retirees, may find greater assurance through a bond's regular interest payments compared to other investments.
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Performance
It is possible to gain a more rewarding return from certain bonds, such as corporate bonds, than from other investment vehicles (like term deposits).
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Diversification
Bonds have the potential to offer a balancing effect to an investor's portfolio because they don't always move in the same direction as stocks.
Risks
Risks associated with investing in fixed income include interest rate risk, credit risk, liquidity risk, and inflation risk.
- Interest rate risk is the potential for losses when interest rates rise. As rates rise, the value of existing bonds decreases.
- Credit risk is the possibility that a borrower may default on its debt obligations. This can lead to a loss of principal if not managed properly.
- Liquidity risk is the potential for difficulty selling a bond in a timely manner or at an acceptable price due to lack of market demand.
- Inflation risk is the chance that rising prices will erode purchasing power over time. This can lead to losses if not managed properly.
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