How Talaria Co-CIO would invest $10,000 today

In light of current market uncertainty, Lucy Dean from The Australian Financial Review asked several fund managers including Talaria’s Co-CIO Hugh Selby-Smith where they would invest $10,000 today.

Hugh’s answer was to look income generating assets.

“We’re likely to be facing a future of meaningful low long-term returns to equities thanks to a potential economic downturn coupled with a high-valuation environment. In this climate, income will play a more important role than ever when it comes to investor returns.

Indeed income is always important. For example, since 1880, the S&P 500 has had three decades (1910s, 1930s, 2000s) in which income was the entire component of total return.”

But he notes that traditional income sources, such as dividends may not be enough, as companies often reduce shareholder payouts in downturns, and while the cash rate remains relatively high.

“I’d look for alternative sources of income generation such as those available on the equity options markets, creating a consistent and differentiated income source,” Hugh says.

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