One quality that helps investors during inflation
This is the 'must have' quality that can see investors cut a path through the challenge of inflationary times.
For many years Australians have enjoyed low inflation, with cost of living rises typically falling within the Reserve Bank's 2-3% target range.
This changed dramatically with the onset of the COVID pandemic. In recent years we have seen inflation nudging 7%, and while the Consumer Price Index is heading south, we are still seeing inflation above the levels many Australians are used to.
How inflation impacts investors
We've been hearing a lot lately about the damage inflation can inflict on economies. Frankly, rising prices can be troublesome for investors too.
Concerns about the economic impact of rising living costs - and the remedy of higher interest rates - can weigh on sharemarkets, pushing stock values down. While rising prices can boost corporate profits, prices may eventually be pushed to the point where consumer spending stalls, and the economy begins to slow.
For investors this can be a challenging scenario to navigate. The good news is that one quality can help Australians weather the storm. And that quality is patience.
A portfolio that stands the test of time
Successful investors know that investing is a long game. It calls for a portfolio that delivers strong, steady performance at all points across the economic cycle.
I've looked previously at the importance of selecting simple investments that are clear and easy to understand, then backing this up by aiming for a diverse portfolio spread across a variety of asset classes.
Investors who can achieve this often have no need to alter their plan, or their portfolio, during inflationary times.
It's always sensible to actively review your portfolio each year to be sure it is still working towards achieving your goals. But patience can be the key to simply letting your portfolio build wealth and deliver passive income over time.
In our current inflationary environment, income generating investments can be very appealing. This is where the 'fixed interest' asset class ticks a lot of boxes as it provides consistent returns.
Regular income, and in particular income that increases alongside inflation, can make it a lot easier to handle the cost of living crunch that many Australians are experiencing at present.
What to look for in a fixed interest investment
For investors thinking about adding fixed interest to their portfolio, it is important to look for an investment manager that has stood the test of time, with a proven track record of performance across the economic cycle.
For 34 years La Trobe Financial has been offering fixed interest opportunities to Australian investors. La Trobe Financial's investment offerings are backed by pools of or exposures to mortgages, making them intuitive and easy to understand. These mortgages are taken out by high-quality borrowers who may have a complex credit proposition - where it's not as easy as running the loan application through a computer to spit out an answer. Instead, La Trobe Financial takes the time to assess each application individually on its merits.
La Trobe Financial looks very closely at the quality of every loan application received. At least three sets of eyes review each loan application - a depth of credit assessment that explains why no investor has ever lost money with La Trobe Financial in any of their portfolio accounts.
Long story short, La Trobe Financial takes the time to be sure of the quality of their fixed interest products, so investors can be confident of earning low-volatility income and healthy returns no matter which stage of the economic cycle we're in. That makes it a lot easier to be patient, and let your portfolio work its magic.
La Trobe Financial is regulated by the Australian Securities and Investments Commission (ASIC) and holds the requisite regulatory AFSL and ACL to operate the Credit Fund, place RMBS issuances, and provide credit services. La Trobe Financial Asset Management Limited ACN 007 332 363 Australian Financial Services Licence 222213 Australian Credit Licence 222213. Financial product advice in this article is general only and does not consider your personal circumstances. Consider the PDS and TMDs on La Trobe Financial's website latrobefinancial.com.au before investing.
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