But there’s likely to be a lot of policy uncertainty and interest-rate volatility over the visible horizon, so it’s critical to source income efficiently—generating an attractive income level while also cushioning against the inevitable declines in down markets. The keys: careful asset selection and thoughtful portfolio construction.
The Income Investor’s Dilemma
Income investors seeking to boost yields often find themselves depending on higher-yielding investments such as bank loans, high-yield bonds and dividend-paying equities. While these investments can play a valuable role in a portfolio, they carry more risk than core bonds—as seen in their higher equity market beta and bear market drawdowns (Display).