Fixed Income – Global
There was a time in the 1980s when interest rates paid 15%. Getting paid was never easier. In fact for the 1990s (decade) you could average 7% a year and never even glance at it. Like dinosaurs or the commodore 64, those times are gone. Now 5, 10, even 30-year bonds pay less than 3%. So while a $100,000 bond in 1984 may have paid $15,000 a year it would now pay $3,000 or less. That doesn’t buy much lifestyle, or comfort, or freedom.
“Fixed-income” is a way of describing deposits, certificates, bonds, and even annuities that protect the value of your investment while paying you an income.
Bonds also are less safe than people were expecting. 2013 had the “taper tantrum” where six weeks saw a loss of 6.85% (FTSE TMX Canada All-Government Bond Index), and real-return bonds dropped 11%. It’s important to realize, whether friend or foe, bonds can be fickle, falling on a loose word from a political or financial leader. See below for hope with bonds.
Some are afraid of all possible risks so choose guaranteed income certificates. But that means the bank or insurer is paying 2% to get 6% for themselves. “The bank takes the risks.” Yet GICs create a new risk: earning so little, people can run out of money. In a different blog we’ll also speak about Life Annuity income.
This page is brief but it’s especially vital to realize the value of Global Fixed Income because there are countries and corporations in other parts of the world, paying 4%, 6%, 8% or more on their bonds and commercial loans. Plus in the right times, a global mix can help you gain in currency values, improving ratings, and faster-growing economies.
Most of our clients in this area will have two or three distinct teams managing the risks and sustaining income. We creatively blend the strengths of these teams to safeguard the income you’ll be getting from all forms of investment-grade government and corporate debt.
People share with me their deepest beliefs and feelings to preserve wealth and life. Picture the following conversation: “Don’t lose my money. I want to stay active and be comfortable. Someday my expenses will be higher. I’ll need more income than ever. And what’s left when I’m gone, I want my loved ones to enjoy it.”
Fixed-income, combined with our other “life income mandates” can absolutely reduce risk and sustain income for lifestyle and comfort through the seasons of life yet to come.