Low-fee funds offer head start in a low-returns world

RISKS lurk in every corner in 2022: Significantly higher inflation; war; higher oil prices and interest rates; losses in both fixed income and equity portfolios. What is an investor to do?

The truth is that almost every year, the coast is never really clear for investments. This time, however, feels rather different because inflation, which has been tame or in decline for the past decade or two, is not expected to be "transitory'', using the Fed's earlier language. After a decade scraping the bottom, interest rates are also rising.

The risks and investment challenges are acute for older investors - pre-retirees and retirees - who may still have a long horizon, but hew to a mainly fixed income portfolio, on which they expect to rely for income when they no longer work. Year to date (up to Apr 6), based on Morningstar average asset class returns, both fixed income and equity funds are negative. Global equity funds are in the red by an average 7 per cent, and fixed income by 6 per cent.