This low rate environment creates a now all too familiar dilemma for many investors who need an income from their savings.
Seeking income in a low rate environment has seen investors search for yield in riskier assets. While the risk associated with higher yielding investments can’t be eliminated, we look at three ways in which that risk can be reduced
Low interest rates and quantitative easing have reduced the income available to investors from cash and government bonds. The low level of rates is expected to continue given the recent dovish shift from the Federal Reserve and the European Central Bank, due to still subdued inflation and slowing growth. In the UK, even if Brexit-related uncertainty were to diminish, the Bank of England would be likely to only raise rates very gradually.
EXHIBIT 1: ANNUAL INCOME GENERATED BY £100,000 IN A THREE-MONTH BANK DEPOSIT
GBP (LHS); % change year on year (RHS)
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