|
|
| • EXCH RATES |
|
Baht/$ 33.47/52
Bid/Ask
|
GOLD |
15,200
- 50
|
|
NET Worth
ANDREW WOOD
Hip investors rely on smart investing strategies, as opposed to fads when selecting portfolio wardrobes. Flared trousers lose their fashion value just as quickly as fair-weather tech stocks lose their real value.
As bulls give way to bears, however, is it prudent for investors to add HYPS (high-yield paying shares) to a portfolio as part of a well balanced mix-and-match combination of strategies during volatile times? This depends on the risk and grading of HYPS in similar ways to bonds and gilt-edged securities. Some are blue chip while others are pure junk.
Over a span of, say, 20 years, however, instances of a blue-chip corporation defaulting on its employee and shareholder obligations are extremely rare. Bond assets and reassurance indemnities mandated by governments are further safeguards implemented to protect various stakeholders' interests.
Some fundamental differences between gilt-edged and blue-chip securities do make a considerable difference to the yield returns. Whether they have long- or short-term performance goals, there are some basic considerations:
Defined or guaranteed returns: Gilts, treasury bills or limited-edition bonds are by nature intended to guarantee a return of their specific issue redemption value. Thus such bonds provide fixed returns over defined periods ranging in accordance with market conditions at the time and in the countries in which they are issued.
Conversely, HYPS are not guaranteed, nor are their dividends. Prudent allocation of high-yield performers within an asset-managed portfolio will realistically produce decent returns in annual dividends. There is also the asset growth element in these holdings. Returns from bonds are similar to dividend payments but without additional growth element opportunities. HYPS are thus potentially the advantageous choice.
Returns from HYP share investments are also influenced by elements of market timing. If you buy HYPS at top-end net asset value (NAV) rates, you may well suffer losses later from potential market crashes. If you buy in bear conditions you stand to gain substantially from the eventual recovery of your holdings, once the bull returns. Not only that but you will enjoy dividend accruals on the way making the investment return very acceptable overall.
Collateral shareholder benefits: Government bonds and national saving certificates do not give investors any additional benefits such as corporate product discounts or bonus shares. Dividends and concessions are obvious benefits designed to keep investors on board the rolling investment train to the mutual reward of company and shareholder alike. HYPS are thus natural spread-betting hedge strategies in bear market years as they continue to pay returns through dividend distribution. Investing prudently in bear markets thus fuels optimum growth returns when bulls return from their hibernation.
Tax-friendly compounded gains: Onshore or domestic investors can be induced by tax-concession offsets in respect of bonds and gilts. These tax give-aways tend to be relatively small in the big picture. They are also potentially an attraction to those who live within tax threshold limits, using their portfolios as income generators. However, such concessions tend to lose their value to high net worth individuals and wage earners above the tax threshold. It could also affect you if you are a tax-liable expat who falls foul of the "at arms length" rules or EC tax directives on unearned income.
Australian and New Zealand expats are in a very fortunate and unique tax situation. To remain in this position you will be well advised to wrap as many of your assets as possible to vehicles that will ensure continued tax-free status.
HYPS in blue-chip established corporations are real bargains in today's market. Many blue-chip areas such as pharmaceuticals, banks, essential services and insurance are well worth looking at. Basically, it's both hip and smart to invest in blue chips today.
There are also good benefits from fixed-term private banking deposits. These can be incorporated into a well-balanced portfolio structure to ensure that you are making the most of the bear situation.
All these diversified factors play an important role when strategising how best to structure portfolios for optimum gain without undue risk. Risk-intolerant investors should never throw caution to the winds and plunge into uncharted waters. Ensure that you seek professional guidance when devising a strategically well balanced portfolio of investments for optimal return.
Why suffer taxation on already low-returning investment holdings, when they can grow overseas in tax-exempt havens of tranquillity? In certain cases, the hippest accessory is a simple calculator for determining which style or savings vehicle will continue to remain popular and profitable while others end up as fashion victims.
Questions to the author can be directed to Barclay Spencer International on 0-2653-1971 or email to info@barclayspencer.com
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