How to tell an oasis from a mirage in the search for yield
History shows that the highest-yielding assets are often compromised and can deliver disappointing returns with significant risks
06 September 2020 - 22:24
Income is the dominant driver of most asset class returns over the long run. For some asset classes, such as high-yield corporate bonds, the income received can even exceed the total return due to a portion of capital being lost to defaults.
Even for equities, reinvested dividends are typically responsible for more than half of cumulative total returns over time, and arguably this understates the importance of income to stock market investors, with buybacks providing an additional route by which cash is returned to shareholders...
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