Defend Your Portfolio
Bonds. Often underrated, they can be reliable when needed the most. Now may be time for you to reassess your portfolio and reconsider the important role fixed income can play.
Why Invest in Bonds?
For most investors, the key role of bonds is to reduce overall portfolio risk and increase certainty. Most bonds have a fixed maturity date, repay the principal amount at maturity, and pay regular coupon payments. In addition:
Track record in managing indexed fixed income strategies
Amount in fixed income assets
Fixed income index strategies
The global bond market is $102.8trillion in size1 and offers a wide variety of investment opportunities, from different types of issuers and credit qualities, to a range of maturities.
In Australia, the bond market is split into two main types of bonds:
To build a well-diversified and high-quality portfolio, you need to think beyond a broad fixed income benchmark.
Having exposure to a variety of issuer types and maturities, to include bonds issued by corporations, state governments and foreign institutions, will increase the diversification of your portfolio. However, it will also increase credit risk.
The risk of default can also be mitigated by focusing on investment grade-rated bonds, which tend to be from companies with stronger balance sheets that are able to better withstand economic downturns.
Debt markets have typically been expensive and hard to access for retail investors, requiring a high minimum investment. Fixed income ETFs can offer easy execution at a fraction of the cost of fixed income managed funds. Traded on the ASX like a share and with a transparent investment process, you will know exactly what they hold and can choose ETFs that align closely with your risk/return profile.
ETFs can also offer investors diversification and quality, depending on their underlying index. Index methodologies can screen for high quality issuers, so you don’t have to do it on your own. ETFs also further narrow down the index holdings to a manageable number of holdings to keep costs under control.
Recognised as an industry pioneer, we created the first US-listed ETF in 1993 and the first Australia-listed ETFs in 2001. Since then, we have developed a range of ETFs that provide Australian investors with the flexibility to select investments that are aligned to their investment strategy.
Each new member of the SPDR ETF family reflects our intimate knowledge of the ETF market and over 40 years of indexing experience.
As with our first ETF, all out ETFs are physically backed to closely replicate the performance of each index.
ETFs: a low cost, Simple, and Tax Efficient Investment for SMSFs
Typically structured like managed funds, but listed and traded on an exchange like stocks, ETFs are flexible trading and investment vehicles that can be used to help the Self-Managed Superannuation Fund investor satisfy several critical investment needs.
1 Source: BIS as of Q4 2018; http://stats.bis.org/statx/srs/table/c1