Four per cent. It’s the holy grail for many investors. How do they generate a 4 per cent income in perpetuity without risking capital? Answer, they can’t. Not in these low-return times. Risk-free returns are running at less than 2 per cent. Anyone who claims that more income than that can be squeezed out without taking some risk is not to be trusted.
Financial advisers sometimes come up with elaborate mechanisms to help their clients achieve 4 per cent while trying to minimise risk. Usually it involves eating into capital, in the hope that rising asset prices will eventually more than compensate.
Perhaps an easier way is simply to invest in a range of well diversified investment trusts . . . and wait a few