In our view, investors are facing three key challenges that their investments must adequately address. First, people are living longer and spending more time and money in retirement. Second, inflation, even at today’s relatively low levels, can substantially reduce individuals’ purchasing power over time. Lastly, U.S. consumers are spending more each year on goods made outside the United States.
We believe Oppenheimer International Growth and Income Fund1 (OIMAX) may be able to help investors address each of these challenges. With its focus on high-quality international, dividend-paying stocks, this Fund has the potential to help investors better manage inflation and longevity risk, and also allow them to reduce their “foreign consumption liability.”
1. Longevity risk
No one wants to face the prospect of outliving the amount of money they’ve invested. Traditionally, retirees focused on investments that could provide current income and protect their principal. But with the prospect of living 20 to 30 years in retirement, today’s retirees need to achieve growth to ensure their principal doesn’t lose its purchasing power from the continually eroding effects of inflation. Equities can provide that necessary growth potential. Today’s retirees need to consider a larger allocation to stocks than previous generations.
2. Inflation protection
People may think inflation is no longer a threat to their portfolios because “headline inflation” – the Consumer Price Index changes reported by the Bureau of Labor Statistics – has been relatively benign in recent years. But these low inflation rates disguise the actual long-term increases in the cost of everyday goods and services. Dividend-paying stocks offer investors the potential for a level of income growth that could keep pace with, or even surpass, the rate of inflation.
3. Foreign consumption liability
The level of consumption of non-U.S. goods goes far beyond the products people immediately recognize as imports – like German or Japanese cars. In addition to a broad swatch of luxury items, that includes goods that address basic needs – like food and clothing – and an equally diverse range of discretionary items. Today, over half of what Americans consume comes from overseas, but non-U.S. stocks are only a small portion of the average investor’s equity portfolio. By investing in the stocks of companies outside the U.S., Americans can benefit from the growth of the companies they’re supporting with their everyday spending.
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1 This is a new fund with a limited operating history and an inception date of 10/28/16.↩
There is no guarantee that the issuers of stocks will declare dividends in the future, or that dividends will remain at their current levels or increase over time. Foreign investments may be volatile and involve additional expenses and special risks, including currency fluctuations, foreign taxes, regulatory and geopolitical risks. Emerging and developing market investments may be especially volatile. Eurozone investments may be subject to volatility and liquidity issues. Investments in securities of growth companies may be volatile. Investing significantly in a particular region, industry, sector or issuer may increase volatility and risk. Diversification does not guarantee profit or protect against loss.
Mutual funds and exchange traded funds are subject to market risk and volatility. Shares may gain or lose value.
These views represent the opinions of the Portfolio Manager(s) at OppenheimerFunds, Inc. and are not intended as investment advice or to predict or depict the performance of any investment. These views are as of the publication date, and are subject to change based on subsequent developments.