From Gowdie Family Wealth (AUS) –
Will your wealth survive long enough to pass onto your family?
This is the dilemma of investing in a world of ultra-low interest rates and artificial market pricing.
Conservative retirees, with another 20–30 years ahead of them, are struggling to generate sufficient income from interest to pay the bills. They are being forced to deplete their capital base to make ends meet. This creates a deadly spiral of less capital earning less interest, resulting in a greater capital drawdown.
Conversely, opting to invest in assets with higher yields carries the risk of a rapid depletion in capital from a severe market correction. A classic ‘damned if you, damned if you don’t’ scenario…unless you believe in a third alternative: that markets do not correct.
In that case, it makes no sense to be in cash. Instead, you’d invest in higher yielding assets, safe in the knowledge there is no real threat to your capital.
If you place a low probability on the third alternative, then it really is a case of the ‘devil or the deep blue sea’.