The days of historically low interest rates are numbered.
There's no telling just when rates will rise, how fast or how much. In the meantime, investors face the challenge of pursuing income in the current low-yield environment, protecting against future rising rates and seeking opportunities when yields do move up.
What can investors do?
- Make sound decisions based on their risk tolerance, timeline and investing goals
- Develop a well-diversified portfolio
- Consider strategies that have historically performed well in rising-rate environments
Consider several strategies
Because each rising-rate period can vary, investors and their advisors should consider a broad range of income-generating asset classes. Here are six that have potential:
Shorter durations make them less sensitive to rate movements
compared to intermediate and long-term bonds.
Automatically adjust as interest rates change.
High income relative to other bonds may cushion the effects of rising rates.
Future growth is expected to outpace developed countries.
Potential to provide a consistent income stream and contribute to total return.
Typically less volatility than an all stocks portfolio; less interest-rate sensitivity
than an all-bonds portfolio.