Asia wins all round

This posting is more to do with finance than marketing – if equities and bonds are not your bag then give it a miss.

An FT article, about the effect of aging on the choice of equity investments, made me think. All the advice about investments and retirement say that as you approach the time when you move from work to retirement income you want as little risk in your portfolio as possible. This does make the big assumption that you have anything in your ‘portfolio’ but that is another matter.

A survey of US investors discovered that more than half of retirees' investment income came from interest and dividends, compared with a third for people of working age.

Similarly, older people were found to have bought stocks whose dividend income averaged 2.6 per cent, compared with the measly 0.8 per cent yielded by the portfolio of younger investors.

All this I knew, but what I had not thought about were the repercussions on global capital markets – especially Asian ones. As a large chunk of the US and European populace retire and demand higher yields from pension and mutual funds they are likely to look East.

Classical financial wisdom would say that at retirement you move from owning equities to buying bonds and high-yielding stocks. The only problem is that the army of soon-to-be pensioners will retire in an era of historically low yields. As a recent note by Morgan Stanley points out, bonds yields in the economies of the Group of Seven leading industrialised nations have been falling for a quarter of a century and are hovering near 50-year lows.

Dividend yields on Western stock markets have been rising of late, but they still range between 1.8 per cent in the US to a still miserable 2.5 per cent in France and Germany.

In the same way as China and India are becoming the source of manufactured and service products it is possible they will also become the place to provide decent dividend return on equity and bond investments.

It will not be long before you start to hear the cry: “not only are they taking our jobs but also our investments”. Dick Stroud www.20plus30.com