The Role of Income in Portfolios

Many aspects of investing are fundamentally rooted in the idea that total investment return includes both investment income and investment price appreciation (growth). Nearly every asset class can be decomposed into these two characteristics—some assets being composed mostly of income and some assets being composed mostly of price appreciation. As interest rates have fallen around the world, the importance of income, and the role it plays in portfolios, has seen a dramatic increase. In this Topic of Interest, we revisit these two fundamental characteristics to provide investors with a lens with which to view decision-making in the current market environment.