Investment strategies for a world of shrinking bond yields

THE collapse of Japan's Nikkei stock index from almost 39,000 in 1989 to 8,000 in 2008 has been well documented and was presumably traumatic for many Japanese investors.

However, the decline in the 10-year government bond yield from a peak of over 8 per cent to less than 0 per cent (that is, a negative yield) has arguably been even more traumatic.

While declining yields have, by definition, led to higher bond prices and therefore healthy returns for investors over the years, they are hugely challenging for today's investors planning to reach their future retirement goals.