It is highly probable that we will be in an environment of low interest rates for some time. While investors are paying over the odds for growth as a result, the good thing is that there remains good value propositions on the income front in the equities asset class. It needs to remembered too, that investing is a means to an end. You cannot pay the bills with your share certificates, no matter how much they're worth. Access our research and sign up for a free trial today.
You need income. As the label says on the tin, Blue Chip’s value philosophy and process leads to stocks that produce consistent profits and generate income, particularly given that there is a big cap bias.
The global equity markets are having a bull run, which is good. However such periods of outperformance are historically followed by long stretches of modest underperformance.
Download your free report.
How to recession proof your portfolio.
Growth is being favoured, but not all the stocks that are priced for growth will be successful. There is simply not enough money in the economy. The amount of wealth in an economy doesn’t change, it gets redistributed.
A good example was the dot.com bubble in 2000, where the market reassessed the profits that were available and concluded that too many companies were overvalued. If all the companies being priced for growth in the current market deliver, there will be a thousand Microsofts, whose market cap is US$1.6 trillion.
What we had with the COVID-19 crisis was a short sharp correction; not an extended downturn. Governments and their agencies (central banks) stepped in with fiscal and monetary policies. Investors have once again found their footing. The norm is that downturns are prolonged because they are led by central banks tightening the liquidity available in order to slow economies down.
While we advocate a balanced portfolio with Small Caps for growth, investors also need to be prepared for the party to end (it always does) which is where Blue Chip Value comes in. With Blue Chips, you might miss some of the Afterpays of this world, but our Blue Chip Value Portfolio has not missed the positive performance of the equities asset class. The BCV Portfolio’s return is also being bolstered by strong dividend income, with an average yield of just under 5%, which climbs to just under 7% when you include franking credits.
We love growth but we also want to protect our capital and generate income. That is where Blue Chip Value fits in.
Access our research and sign up for a free trial today.