Let’s face it. Fixed income is probably not as compelling a subject when it comes to watercooler conversation as equities or property.
Sure, a fixed-income investment may not come with a sweeping, grandiose tale like that of a punter who cleaned up after getting a tip from a cabbie about the impending good fortunes of a small-cap gold miner and went all in.
Nor is fixed income investing as central to the Australian psyche as our overly-discussed obsession with property investment.
But while it may not be as much of a talking point or as ‘sexy’ as other asset classes, an under-allocation to fixed income is something Australian investors should be taking more seriously, according to several experts.
“We think people are under-allocated to fixed income in this market – it’s an equity-focused market,” says Mark Mitchell, co-director of Daintree Capital Management.
“The asset allocations that I have seen typically have too much cash, a bit of property, and probably too much equity. That’s typically the way it works.”
There are several possible reasons behind this mismatch, Mitchell says, but whether it’s the Australian “punting culture” or the availability of franking credits for share investors, our ageing demographic means advisers and their clients should have a greater allocation to fixed income assets.
“It doesn’t have to be with us, but it needs to be something that protects capital and provides regular income generation...