Shift in behavioural approach to investing needed in a zero interest-rate world

INVESTORS increasingly find themselves in a catch-22 situation today. With almost US$16 trillion worth of bonds worldwide, mostly issued by European governments, offering negative yields, investors are sure to lose money if they hold on to these bonds till maturity.

And yet these bonds have behaved as safe-havens over the past year - offering investors sizable returns - amid concerns about slowing global growth and inflation. Meanwhile, equity markets have failed to sustain their uptrend on these very same concerns.

To our mind, the choice facing investors need not be binary. There are ways to navigate the world of lower interest rates and falling bond yields, but this would require a shift in mindset and attitude. The solution, in a nutshell, lies in diversifying investments across geographies, asset classes and investment styles.