Perfect Investment Portfolio Has Equities And Fixed Income

Today, based on numerous long-term measurements, many or most stock markets appear to be heavily overvalued. Bonds also look expensive by their own long-term standards. Investors need an investment portfolio that is exposed to all likely environments, and committed to none. One which is based on intelligence and reasonable suppositions about the future, and not merely data mining from the past. There is only so much the past can tell you.

In addition to knowing how an investment works, you need to understand what specific role it plays in your portfolio and how it improves your portfolio’s performance. Although there is no predetermined number of investments you should own, once you get beyond five or six, chances are you have got a lot of overlap or you are venturing into more risky investments you don’t need. The fact of the matter is that you don’t need to constantly be adding new asset classes or investments, just because investment firms introduce them or you read favorable reviews. In fact, if you do, you’re more likely to end up with an unwieldy hodgepodge of investments that are difficult to manage, rather than a simpler portfolio that more efficiently balances risk and return.

To get the maximum return while taking the minimum amount of risk, it helps to think of your portfolio as being split into two parts: an equity portion comprised of stocks, and fixed income portion made up of bonds, GICs, and income-generating investments. Generally speaking, the higher the percentage in equities, the greater the risk. That said, there should be a minimum 25% holding of equity-regardless of age. Taking this cautious approach to stocks is less risky than a portfolio invested 100% in fixed-income investments. Moreover, it protects against the negative effects of inflation.

Traditional-minded investors with a love for investing in gold are likely to be shocked by the absence of their favorite precious metal in “the perfect portfolio.” But, fewer investors are prepared to commit any money to an investment that generates no income. Unlike a bond, the metal pays no interest. There is no dividend and it may not protect you against the worst forms of inflation. Moreover, there is no implicit guarantee that it will appreciate in value.

All accomplished chefs know the secret to cooking a great dish is mixing the right ingredients, in the right amounts. Surprisingly, putting together a well-constructed portfolio isn’t much different. As in cooking, you must begin with the correct basic ingredients, in this case stocks, bonds, and alternatives, but if you get the proportions right, the result will be a huge success.

Inflation Can Create Losses in an Investor’s Portfolio

Inflation occurs when the general price of the goods and services rise and, as a result of the increase in cost, the purchasing power of money decreases. The obvious consequence, or effect, of this is that inflation makes it more difficult for people to afford the basic necessities of life if their income is not able to keep pace with the inflation rate. This can also create losses in an investor’s portfolio if their investments are not earning at least as much as the rate of inflation.

The rate of inflation is important as it represents the rate at which the real value of an investment is eroded and the loss in spending power over time. Inflation also tells investors exactly how much of a return their investments need to make for them to maintain their standard of living.

For investors, a high inflation rate has historically been considered anything over the 3% to 4% annual range. In the last decade, the United States has experienced historically low interest rates. This can be attributed to the unprecedented intervention by the Federal Reserve and U.S. lawmakers to avoid the collapse of the global economic system in 2007, 2008, and 2009.

Central banks rely on the relationship between inflation and interest rates. If interest rates are low, companies and individuals can borrow money cheaply to launch a business, earn a degree, hire more workers, or buy a new car. In other words, low interest rates encourage spending and investing, which in turn generally stokes inflation.

During periods when the price of goods and services are increasing, the uncertainty caused by the rising inflation may discourage people from investing. This is especially true for people investing in bonds. Inflation is a bond’s worst enemy; it erodes the value of the investment’s return. Investors can protect their purchasing power and investment returns over the long-term by investing in hard assets that generate an income, such as an investment in shipping containers.

When it comes to inflation, whether you have buried your money in the backyard or it is sitting in the safest bank in the world, it is becoming less valuable with the passing of time. With this idea in mind, investors should try to invest in opportunities that can deliver returns that are equal to or greater than inflation.

Shipping Containers Top List of Income-Generating Investments

A growing number of investors are seeking investments that will put their money to work and generate a stream of residual income. Most are looking for an investment opportunity that can supplement a fixed-income, like a disability or retirement. Regardless of the motivation, the demand for income-producing investments is rising.

At the top of the list of income-generating investments is shipping container investing. This is an investment in a hard, tangible asset that is used globally to facilitate trade. Different types of shipping containers can be found working on trains, trucks, and ships, all around the world.

With the help of a container investment and leasing company, investors can own a fleet of hard-working cargo containers and earn a monthly income for themselves. The shipping containers purchased by investors are deployed by the leasing company on busy trade routes between the continents and shipping ports of the world. Employed by shipping industry leaders to meet the import and export demands of countries around the globe, these cargo containers spend years crossing the world’s oceans and seas.

The expected lifespan of a new shipping container is more than a decade. So, an investment in shipping containers could deliver monthly returns for 10+ years! This time period, and associated risk, is comparable to an investment in a Treasury bond. The thing that differs most between the two is the rate of return. Shipping container investments generally pay between 10 percent and 15 percent for the duration of the agreement, whereas a bond will yield approximately two percent over the same time frame. Moreover, investing in shipping containers provides a monthly return in the form of lease income; bonds do not.

Despite increasing talk of protectionism in the United States, other economic giants – like China and India, the U.K, Canada, and the European Union – are moving ahead with free trade deals that remove many of the tariffs and taxes that impede economic growth. Over the next half-a-century this will create a rising demand for shipping containers to transport cargo to emerging markets and developed countries alike. Count on this to produce a dependable, long-term income for container investors.