Clear investment goals needed after interest rate cut
Investors need to decide if they are after capital stability or income sustainability, AMP Capital said after the official cash rate was cut again on Tuesday by 25 basis points to two per cent
AMP Capital said retirees need to identify an investment strategy to achieve a sustainable income as official cash rates are now at historically low levels.
The investment manager said cautious investors relying on income from term deposits would be a risky strategy as fluctuations in cash rates are too large.
"A strategy based on term deposits is exposed to high income variability over time but benefits from low capital volatility," AMP Capital's multi-asset group chief investment officer, Jeff Rogers, said.
"Retirees need to recognise that the average level of cash rates in the years ahead is most likely to be lower than our experience during the past 30 years."
He said stability of income could be achieved through a selection of investments with specific characteristics such as corporate bonds, equities, and property and infrastructure.
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