Investing for Real People: Investor goals are the same, but the solutions have changed.


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Growth. Income. Protection.* Three basic needs of any investor. Growth is required to finance long-term aspirations, income to pay the bills, and protection to hedge against a variety of different risks. Getting all we need in a rapidly-changing investment landscape will require new thinking, new solutions, and a new conversation away from financial jargon and arcane concepts to a laser focus on investor goals and how to define success.

The good news for investors is that there is a wealth of opportunity in the world for growth, income and protection. Growing our assets will require expanding our opportunity set. Today, the U.S. economy, while still the world’s largest, is no longer the world’s fastest growing. According to Bloomberg, more than half of the world’s biggest companies are headquartered outside the U.S. Foreign investments may be volatile and involve some special risks. Nevertheless, winning companies and investment strategies are those that find ways to capitalize on the shifting global landscape. Growth is about looking for companies, regardless of where they are headquartered, that sustain distinct advantages over their competition. Importantly, it is about paying a reasonable price for participation in the growth opportunities of those companies.

Generating real (after inflation) income may also require looking beyond traditional sources. Investments in U.S. Government bonds are unlikely to serve us much better and may lose value when interest rates rise. Fortunately, there are other income-generating options. Investments in corporate bonds may provide additional yield with typically less interest rate sensitivity than government bonds. Developed and emerging market sovereign and corporate bonds offer access to higher yields than are available domestically, foreign exchange exposure which can help offset swings in the value of the U.S. dollar, and a potential hedge against imported inflation. All fixed income investing entails credit and interest rate risk. However, these assets may provide a better chance to help generate real income than traditional bond holdings.

Investors may look beyond bonds entirely. Dividend-paying equities and alternative equity-like securities like Real Estate Investment Trusts and Master Limited Partnerships may also provide attractive yield opportunities. While these asset classes are more complex and have additional risks when compared to common stocks or bonds, and past performance does not guarantee future results, they have historically outperformed government bonds in rising inflation and interest rate environments.

Many investors think of protection solely as the preservation of capital in times of market declines. But investors need to protect against a combination of other factors such as domestic and imported inflation, and currency volatility that could make a dollar earned buy fewer and fewer goods and services as time goes on. Finally, protection is needed to counter the potentially damaging effects rising interest rates may have on portfolios. Some asset classes that may provide these types of protection include those whose value or income streams rise when interest rates rise or whose value doesn’t typically move in tandem with traditional markets.

Despite all the changes in the world and all the complicated variables investors must now navigate, our basic needs remain the same. By focusing on goals, investors stand a better chance of achieving the growth, income and protection against risks they need to be successful on their own terms.

*Protection is positioned as an investment goal. Investing in certain securities may help to hedge against certain risks, but does not imply any guarantee from loss. Mutual funds are subject to risk. Shares may gain or lose value.

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These views represent the opinions of OppenheimerFunds, Inc. and are not intended as investment advice or to predict or depict the performance of any investment. These views are as of the open of business on September 3, 2013, and are subject to change based on subsequent developments.

Carefully consider fund investment objectives, risks, charges and expenses. Visit, call your advisor or 1.800.225.5677 (CALL-OPP) for a prospectus with this and other fund information. Read it carefully before investing.

Oppenheimer funds are distributed by OppenheimerFunds Distributor, Inc. Oppenheimer funds are distributed by OppenheimerFunds Distributor, Inc. OppenheimerFunds Distributor, Inc. is not affiliated with The NASDAQ OMX Group, Inc.
© 2013 OppenheimerFunds Distributor, Inc. All rights reserved.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Investing Ideas , Economy , Retirement

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