Financial planners may be seduced by high returns, but in most cases, 'you get what you pay for', according to Mirvac Funds Management, chief executive Stephen Tunley.
Mirvac AQUA has commissioned a report, by Morningstar, designed to help financial advisers and investors understand issues and risks associated with investing in different income-oriented investment products.
"Advisers are also being confronted with an ever-expanding range of investment products marketed to meet those income needs. In this environment, it's more important than ever to reiterate some of the fundamental issues to consider when assessing income funds," Morningstar head of research Anthony Serhan said.
The report takes six income product groups and analyses their characteristics, looking at what the funds invest in, the number of options, the effects of ongoing expenses, performance issues, and detailed assessments of each income product group's key risks.
The income product groups covered are cash/enhanced cash, domestic bonds, global bonds, mortgages, high-yield, and hybrid income.
Portfolio diversification, financial markets, economic and financial conditions, and the level of income payments all have to be considered, when investment decisions are made the report said.
The study also examines correlations between product groups and their use in portfolio construction.
"There is no such thing as a free kick when it comes to investing," Tunley said.
Morningstar is the owner of InvestorInfo, publisher of InvestorDaily.
