The days of historically low interest rates are coming to an end.

The Fed's decision to begin gradually nudging up short-term interest rates has investors facing three challenges: pursuing income in a still low-yield environment; protecting against rising rates; and finding opportunities as yields 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:

Short-Duration Bonds
Shorter durations make them less sensitive to rate movements compared
to intermediate and long-term bonds.

Floating-Rate Securities
Automatically adjust as interest rates change.

High-Yield Bonds
High income relative to other bonds may cushion the effects of rising rates.

Emerging-Markets Debt
Future growth is expected to outpace developed countries.

Dividend-Paying Stocks
Potential to provide a consistent income stream and contribute to total return.

Balanced/Hybrid
Typically less volatility than an all stocks portfolio; less interest-rate sensitivity
than an all-bonds portfolio.