How to navigate a low-interest rate, low-growth world

Emerging markets have soured along with the strong US$ and falling commodity prices. Europe is still thawing from the GFC, growth is slowing in China and US economic growth will labour below the long-term average due to the country’s high national debt and low interest rates. It’s important to remember that economic growth is not a good predictor of investment returns. Just look at the divergence between the performance of China’s economy and its sharemarket over the past decade. That said, weak economic growth combined with high valuations does have its implications. For starters, you can no longer rely on a rising tide lifting all boats. Up until recently, owning a portfolio of the big four banks and the two iron-ore titans had worked out very well, without requiring much effort other than holding your nerve. If you can find businesses listed abroad that aren’t totally reliant on a strong economy for growth, and that operate in industries that don’t exist in Australia, then the increasing volatility will allow you to intelligently diversify your portfolio without taking large risks. (VIEW LINK)