Income is Key
We have nicknamed our investing strategy smart income. The concept came from examining the investment strategies that the big pension funds use and employing them for our own client portfolios.
Pension funds need to generate a set return to pay their members and they must do so regardless of whether the market is up or down. The key is buying investments that are focused on paying income. Investments that pay income provide two potential ways to earn a return. Income which relies more on the business operations of the company and capital gains which are more dependent on market conditions.
Companies that pay an income are often financially responsible and have a secure business platform. These companies are better able to withstand uncertainty in down markets and provide a further recovery once the market recovers. The income paid can be used to buy new investments or provide payments for you.
So far during this downturn we have seen very few companies reduce their payments to our clients. We continue to see companies perform and pay their income and this is part of weathering the volatility. This income is not affected by price volatility and more often than not we see the income hold during extreme price volatility. We are very confident that the vast majority of companies we hold will continue to pay income and our clients income needs will be met and uninterrupted.
We have seen stability return to the market and although a bottom is difficult to call until after the fact, the signs are encouraging that we have seen the worst of this downturn. We can still expect to see some volatility ahead but, we see a lot of opportunity in the market and a light at the end of the tunnel.
This is a challenging time for everyone. If you have any questions regarding your portfolio feel free to reach out. We hope everyone and their loved ones stay safe and we will continue to monitor the situation here and keep you up to date as best we can.