In times of economic uncertainty, many savvy investors turn to investment types that offer a sense of security. Fixed-income investments are a particularly attractive option for long-term, or ‘mum and dad’ investors looking to diversify and offset riskier assets. Depending on your financial goals and timeframe, fixed-income investments can offer many potential benefits and help you work towards wealth creation.
Diversification from risk and income generation
Fixed income is a way of investing that is broadly understood to carry a lower risk profile than shares on the stock market. This is because fixed-income assets are generally less sensitive to big picture macroeconomic risks, such as economic downturns and geopolitical events – of which we’ve seen plenty in recent years.
If you’re after a steady source of income, then fixed-income investments might just be right for you. Investors receive a fixed amount of income at regular intervals in the form of coupon payments on their bond holdings.
Why this type of investment can ride out periods of instability:
Head of Funds Management at Landen, Jeff Li, explains:
“This is attractive for those who have some savings and would like to be involved in the property market but don’t have a complete deposit right now.” “As interest rates climb, and property prices are tipped to remain unstable, this type of investing offers an alternative way to earn money from bricks and mortar,” he says.
“The increasing interest rate is making it hard for people to buy into property because the market is on the downside. Now is the ideal time to invest in fixed-income products (around 10% of our investors are repeat investors).
The benefit of investing in the Landen fund is that we’re a retail fund. This means we have a higher level of compliance, transparency and how we disclose information, which is required by ASIC.” Mr Li says.
“The funds raised are then provided as a loan to Landen, which is developing and sub-dividing the land. This generates regular income and the resulting stability is good because we can protect our client’s investments.”
Who can benefit from this?
According to Mr Li, it makes great financial sense for everyday investors to redirect a certain portion of their wealth to this type of fixed-income investment.
“This will be increasingly popular because the collaterals are assets that you can touch and feel, not like investing in different asset classes, like the share market or cryptocurrency. We also accept self-managed super fund holders, especially those who are already investing with us. It’s a great way of being a risk-adverse investor.”
When it comes to building wealth, there are always some associated risks with any strategy. With fixed-income investments, these potential risks can be well managed. As with any investment, it’s important to consider the risks involved carefully and understand your personal appetite for risk.
Interest rates and inflation effects
When interest rates rise, bond prices fall, meaning the bonds you hold lose value. Interest rate movements are the major cause of price volatility in bond markets.
Inflation is another risk for bond investors. Bonds provide a fixed amount of income at regular intervals, but if the rate of inflation outpaces this fixed amount of income, the investor loses purchasing power.
Liquidity risk is the chance an investor might want to sell a fixed-income asset, but they’re unable to find a buyer.
Currently, Landen is offering rates from 8% to 9.75% net return per annum, with investment terms covering 12 to 24 months. That translates to a $100,000 investment, earning the investor between $8,000 and $9,750 a year.
Visit our Funds page to learn more about Landen Funds benefits.
If you’d like to review your finances, and begin your investment journey in 2023 with peace of mind, call us on 1300 526 336 and speak to an advisor. You can find the brief of all our financial services on Landen’s Wealth page.