Use a balanced approach to help build investment income

Telegraph Wealth

In this time of record low interest rates, Chris Ralph, Chief Investment Officer at St. James’s Place Wealth Management provides his expert view.

 For many people, achieving the right level of income on savings and investments is a major priority – particularly those who are in retirement.

We are in a low interest environment, which is set to continue for some time to come following the Bank of England’s decision to cut the bank rate for the first time in seven years to 0.25% - its lowest level in the institution’s 322-year history.

The yield on cash deposits from banks and building societies is negligible. So it’s important for savers to be willing to accept a greater degree of risk in order to obtain the right level of income after inflation and taxation has been taken into account.

When searching for income, it’s important that you don’t overreach for yield by investing in assets that are too high a risk. The danger of doing so may result in the return coming from areas of the market where the long-term sustainability is not necessarily robust - or it is being sourced from an area where it is difficult to understand the product structure and how that income is being realised.

A share that is high yielding, say, 7-9%, is attractive but the market may be signalling that it expects the company to cut its dividend. There can also be attractive yields in the fixed income market, but the return may be high because the market thinks that the borrower may not be able to sustain the interest on its bonds. This means it’s important to carefully analyse the opportunities on offer while at the same time identifying less risky, long-term assets with lower yields. This will help provide a balance of risk and income.  

The property sector has been in the news a lot recently but can still produce attractive yields. The market is displaying scepticism about this sector being able to provide the same levels of capital growth that it has over the last few years, but rental income is still an attraction.

In a balanced portfolio, investors can have a proportion of income generated from equities and fixed income as well as alternative investments, of which property could be one.

Investors can now derive income from sources that are globally distributed. This comes as a result of the development in capital markets around the world, and could provide income revenue from countries such as the US, Japan or the emerging markets.

So the search for income is well and truly on. But caution in the form of a carefully balanced portfolio is a sensible approach to take, particularly in today’s financial climate.

Reader Offer

To help you explore your options, whether investing for income and growth in these challenging times, it’s important to seek expert guidance. The Telegraph, in conjunction with our recommended partners St. James’s Place Wealth Management, are running free Autumn Investment and Tax Planning seminars across the UK.

To find an event near you, call 0800 953 5050 or visit:

The value of an investment with St. James’s Place will be directly linked to the performance of funds selected and may fall as well as rise. You may get back less than the amount invested. Equities do not provide the security of capital associated with a deposit account with a bank or building society. The levels and bases of taxation, and reliefs from taxation, can change at any time and are dependent on individual circumstances.

The above article was created for Telegraph Financial Solutions, a member of The Telegraph Media Group. For more information on Telegraph Financial Solutions click here.