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Category: Rising Interest Rates

5 Ways to Benefit from Rising Interest Rates

5 Ways to Benefit from Rising Interest Rates

Posted By Lineweaver Financial Group
August 09, 2018 Category: Bonds, Rising Interest Rates, Finance

After the most recent interest rate increase in June, the Federal Reserve has signaled that it is likely to continue raising interest rates this year, possibly even as often as once per quarter. In fact, fear that interest rates may rise faster than previously predicted has caused some volatility in the markets. Bond investors have been concerned about this for years, but this time it looks like it’s going to happen. Warren Buffet said, in his latest shareholder letter, that “Often, high-grade bonds in an investment portfolio increase its risk.” That can be true, but then, we don’t all have Warren Buffet’s net worth to fall back on! That may have you wondering – how can I take advantage of rising interest rates? And, generally speaking, bond yields go down as interest rates increase. But remember, while bonds may decline in value, their moves tend to be smaller compared to other securities. Many investors are flooding into U.S. Treasury bonds, making the so-called flight to quality, because right now, the U.S. looks better than other economies worldwide. This means that medium and longer-term bonds – whose rates are often more influenced by investor expectations than anything else – are likely to be most affected. But, there are many strategies you can use to manage your bond portfolio in a rising interest rate environment. For Treasury inflation-protected securities, or TIPS, the Treasury Department uses the Consumer

Don't Let Your Bonds Suffer as Interest Rates Rise

Dont Let Your Bonds Suffer as Interest Rates Rise

Posted By Lineweaver Financial Group
April 21, 2017 Category: Bonds, Rising Interest Rates, Interest Rates, Bonds

After the most recent interest rate increase in mid-Mach, The Federal Reserve has signaled that it is likely to continue raising interest rates both this year and next. Bond investors have been concerned about this for years, but this time it looks like it’s going to happen. That may have you wondering – how do I manage my bond portfolio in the face of rising interest rates? Generally speaking, bond yields go down as interest rates increase. But remember, while bonds may decline in value, their moves tend to be smaller compared to other securities. Many investors are flooding into U.S. Treasury bonds, making the so-called flight to quality, because right now, the U.S. looks better than other economies worldwide. This means that medium and longer-term bonds – whose rates are often more influenced by investor expectations than anything else – are likely to be most affected. But, there are many strategies you can use to manage your bond portfolio in a rising interest rate environment. 1.      For Treasury inflation-protected securities, or TIPS, the Treasury Department uses the Consumer Price Index to adjust the principal for inflation (or deflation) twice a year. At maturity, the investor gets either the inflation-adjusted principal or the original principal, whichever is higher. 2.      Another second smart strategy is to invest in single corporate bonds. You can structure this based on incom

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