But making the big leap from a seemingly safe investment such as cash straight into equities can often feel like "passing go" and not collecting £200 on the way.
It is no secret that bonds have been a difficult place to be. Government yields have spiked in recent months, raising the warning level that a bubble could be on the horizon for the asset class. However, there are still some areas out there that are paying the right yield for the amount of risk investors are taking, according to David Zahn, head of European fixed income at Franklin Templeton.
Zahn says areas such as high yield, emerging market debt and corporate bonds are still delivering the goods when it comes to income.
And as manager of the Templeton Strategic Bond fund, Zahn is putting his money where his mouth is.
"Investors are now looking at their fixed income and making sure they have the right type of fixed income," he said.
"We like high yield. There is still value in the euro area. It has held up well in the recent sell-off."
"Corporates are decent value, but you have to be careful what you buy. Still, generally, corporates offer good value. Emerging market debt still offers a lot of value and we like places like peripheral Europe and Poland, but we like a lot of emerging market debt in Latin America and Asia as well."
The fund is currently split, with one-third in emerging market debt, 25 per cent in the outperforming European high yield fixed income space, and the remainder in investment grade corporates that Zahn feels can continue to deliver an appropriate level of yield.
However, the manager is steering well clear of safe-haven government debt such as US Treasuries, UK gilts and German Bunds.
For the investor who is not ready to take the plunge into equities, strategic bond funds are becoming increasingly popular.
The Templeton fund, for example, is yielding 5.77 per cent, one of the highest figures in the IMA Sterling Strategic Bond sector, and well above the 3.9 per cent average yield of the IMA UK Equity Income sector.
However, on a total return basis, the fund has tended to trail the sector slightly, although it has delivered positive returns over one, three and five years.
Over the last five years, the fund has gained 32.46 per cent while the sector has made 35.13 per cent, according to FE Analytics.
Performance of fund vs sector over 5yrs
Source: FE Analytics
Zahn says the biggest thing that sets his fund apart from others in the sector is its allocation to emerging markets.
"Emerging markets offer better risk/reward than developed markets and the fundamentals are still really good," he said.
Zahn argues that the noise surrounding a slowdown in the region has been "a bit overkill" and that investors should avoid a knee-jerk reaction when it comes to both equity and debt in emerging markets.
"Nothing has changed in the last three to six months. If you liked the idea three to six months ago, you should really like it now," he said.
Despite the fund's large allocation to emerging market debt and European high yield fixed income, it has been roughly half as volatile as UK Equity Income funds over the last five years, and marginally less volatile than the IMA Sterling Strategic Bond sector, with an annualised score of 7.14 per cent.
Still, Zahn says in the current environment, investors need to accept the fact that higher yields will come with more volatility.
"We’re paying a 4.5 per cent to 5 per cent dividend so if you want that you have to have a bit of volatility," he said.
However, he adds that he is more at ease with the sustainability of that yield than he was earlier this year.
"I’m more comfortable getting that type of return now than I was four months ago. There’s a lot of volatility at the moment but that presents opportunities for us. We can use futures to hedge interest rate risk, but we haven’t really done that. We have had volatility, but you can ride through that volatility [in the short term]."
The fund requires a minimum investment of £1,000 and has ongoing charges of 1.35 per cent.
