The RBA rate cut has bitten some investors – find out how to avoid the pain
The RBA rate cut last week has left many investors scratching their head as to how they are going to be generating income going forwards. Cash rates were officially cut to 1.5% last week, resulting in even lower returns for long suffering cash investors. Equally, fixed interest investors will also have to endure further difficulty with yields shrinking further as the flow on effects from this decision kick in.
So where are the opportunities?
Reality is this lower growth environment will require investors to take a different approach to generate income. Over the weekend, in one of the papers, it suggested this reduction in rates would require another $1m in Super, to offset the effects of lower rates. Something which is unlikely to happen for most investors.
Be open to an alternative strategy
Lower growth environments, created by the RBA rate cut, make income generation more challenging. However, in such an environment, strategies such as covered calls would provide real income producing opportunities with a compensation or return rate, significantly higher than bank interest – perhaps in a month, what the bank offers for a year. And in some cases even higher.
Learn how this works and avoid the cash at the bank trap
By learning how this strategy actually works, and there are many steps that can be taken to reduce the risk on the strategy, and tailor it to meet your own personal requirements, covered calls has the capacity to be a real game changer, whether you are retired or want to be retired. Getting up to speed is actually quite straightforward, and now is a great time. After all, the RBA rate cut last week is probably not going to be the last. As a result, the need for income generation is likely to increase further, as time goes on. Why not get to the party early and just start now?