How to Invest When Interest Rates Rise

Fixed income is considered by most investors to be the cornerstone of a well-constructed portfolio, usually through investment-grade bonds with laddered maturities. For more than 30 years, this has worked well, rewarding investors with a steady stream of income and well-preserved capital.

But we now find ourselves at a well-covered inflection point of ultra-low returns and near-certain imminent increases in interest rates — the double whammy of bond investing. This conflation of negative factors has led many pundits to predict a “great rotation” out of bonds and into dividend-paying equities.  Read More…

This article has 6 Comments

  1. Forrest Horton

    Very good read! I have been a strong proponent of high-yield bond investing and have stayed clear of dividend income equity. Yes i do risk loss when interest rates rise but for the past 20+ years it has worked out very well. It's good to be Canadian!

  2. Demarco A.

    I don't agree in parts with this article. It makes it sound like bonds are the holy grail if you potentially go for low-return bonds which result in lower itnerest rate risk and mix them with high-return, higher risk bonds which are much more volatile to spiking rates.

    Personally it seems foolish from my personal experience. Long-term wise studies show that the best approach is dividend indexing.

  3. Haydn

    I was a bit lost in understanding some of this. Is there a primer out there for us new comers? 🙁

  4. Colten Cozad

    Rising interest rates are a fact of life. There are a myriad of strategies to weather it and they all have the same result: you end up with some kind of loss.

    The goal then is to mitigate it.

  5. Jalon K

    It pretty simple and a practice that is deployed (or should be deployed) by all. Diversify, diversify! You can't just assume by shifting your portfolio into one area you are safe.

    Spread it out and take advantage of the benefits that they all offer. That way you weather the storm when it comes — and it will come.

  6. Jerel M.

    I still dont understand how interest rates for my bank account relate to all of this. Anyone know how it all connects together?

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