Ripples Advisory- Strategies for Clients in Rising Rates Environment

Posted by ripples advisory on July 19th, 2018

The Federal Reserve voted in June 2018 to approve a rate increase — the second one this year — and indicated two more increases will be coming before the end of the year. Of course, there is some speculation that the fourth hike in December won’t happen, partly because the Fed will have less room to move due to the dovish stance of many of its global counterparts. There are also concerns that a hawkish central bank could invert the government bond yield curve, signalling a recession.

Whether there are one or two more hikes this year, any time there are rising rates it creates risks for investors. Fortunately, there are several time-tested strategies that can help investors protect their portfolios — and even profit — during a rising rates environment.

Trade Some Bonds for Cash:- Investors can sell some of their bond holdings and put the proceeds in money market funds, certificates of deposit (CD) and other interest-earning cash accounts that have the potential to benefit from rising rates. This strategy works because as interest rates rise, so should the earnings on any cash or money market instruments. This is the simplest (and most extreme) strategy an investor can use when it comes to playing rising rates.

Move to Shorter-Term Bonds:- Another play is to reduce long-term bond exposure while moving into short- and medium-term bonds. Shorter-term bonds are less sensitive to rate increases, and they almost always pay a higher interest rate than cash or money market accounts — but they do provide less earnings potential than bonds with longer maturities.

Don’t Forget About Stocks:- Rising interest rates can be a risk for bondholders, but they can also mean trouble for stock investors. Rising rates tend to have a negative influence on stock prices, partly because of the increased cost of capital companies face when rates rise. There are several sectors in the equity space, however, that generally benefit from rising interest rates — and these are good areas for clients to focus on now. The financial sector, which includes banks, insurance companies, investment funds and real estate firms, benefits from rising rates. That’s because rising rates signal a strengthening economy.

Day trading “Ripples Advisory.”

Learn to create a trading plan with Ripples Advisory “Become A Day Trader.” Ripples Advisory Private Limited Company is providing in-stock advisory and stock market tips in all segment. We give the best opportunity to everyone for making money and we give one to 2-day free trial. And visit our official Page Click here… Ripples Advisory