The Investor’s Dual Dilemma

Investors are facing a portfolio dilemma on two fronts.

The State of Fixed Income Markets
  • Going forward bonds may not earn the returns they have over last 30+ years.
  • Current low yields punish savers, forcing them to stretch for income and risk principal.
The State of Equity Markets
  • Equity markets are volatile and unpredictable (e.g. COVID-19).
  • Meanwhile mounting global debt and demographic challenges pressure global growth.
It’s a Rock and a Hard Place Scenario

Low interest rates punish savers, forcing them to stretch for income and risk principal. But when rates rise, bond values will be eroded. On the one hand, truly “safe” bonds pay a paltry yield that doesn’t even cover inflation, on the other, higher yielding bonds act more like equities when markets are in turmoil.

 

Investors are forced to build financial plans that rely on riskier assets for growth, such as equities, taking on higher overall portfolio risk to achieve long-term goals. 

Did You Know?

A 1.00% rise in interest rates would result in a

drop of 9.89% in the value of long-term bonds.*

Since 1929, the S&P 500 data shows that, on average, bear markets:

  • Occur every 3.8 years
  • Erase over 35% of market value
  • Take 3.3 years to recover**

Navigating the Dual Dilemma

How are you prepared for these historic challenges?    

What are you doing differently?

 

Since 1997, the Swan Defined Risk Strategy has addressed this Dual Dilemma.

 

Explore how you can remain always invested, always hedged seeking growth and portfolio protection.

* Source: Morningstar Direct. Effective duration as of 12.31.17

** Source: Bank of America Merrill Lynch, Global Research, Bloomberg, Swan Global Investments: Returns based on S&P 500 from 1929 through December 31, 2017; Zephyr StyleADVISOR