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Russ Koesterich: We're in this unusual environment, particularly if you’re an investor looking
for income. And the reason is it’s a very weak recovery – the economies throughout
the world are not coming back the way people had hoped. And in order to combat that, institutions
like the Bank of England, the Federal Reserve in the United States – those responsible
for interest rates – are keeping them low for the forseeable future.
If you're an investor - particularly in the bond market right now – it’s very hard
to get more than a 2 or maybe 3 percent return on your money. You've got two choices. You
either accept less return, or you decide which risks you're willing to live with. And for
better or worse we're likely to be in this environment for at least the next several
So what do you do? And I think one of the answers has to be for investors that do want
or do need additional income and are willing to take on the marginal risk -- cast a wider
net. Now, this means a couple of things.
First of all cast a wider net by asset class. Typically most investors fulfilled their income
needs through their bond portfolio. That's becoming much harder to do. And it probably
makes sense to supplement with income from another asset class.
One suggestion would be stocks.
Now, here, investors have an advantage over what they might've had 10 years ago. In many
parts of the world we actually see dividend yields of 3.5, 4, even 5 percent.
So it is possible to generate a good, healthy income stream with stocks rather than bonds.
The key for investors is that first part: which is to cast a wide net. So whether you're
in the U.S. or whether you're in Europe thinking about where else in the world could I be looking
And there are some interesting opportunities. In Australia, in New Zealand, in Singapore,
Hong Kong, many parts of Southeast Asia, we see dividend yields of between 4 and 5 percent.
Some parts of the Nordic countries - even emerging markets - places like Brazil, Taiwan
- are offering healthy yields.
So I think those are the two big messages for investors looking for income. First of
all look beyond the traditional choice of bonds as your primary source of yield, and
second, cast a very wide geographic net.