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:

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.

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

Diversification does not assure a profit nor protect against loss.
Past performance is no guarantee of future results.
Mutual funds are subject to risks and fluctuate in value.
Bond prices are sensitive to changes in interest rates, and a rise in interest rates can cause a decline in their prices.
High-yield, lower-rated securities generally entail greater market, credit/default and liquidity risks and may be more volatile than investment-grade securities.
International investing involves special risks including currency risk, increased volatility, political risks, and differences in auditing and other financial standards.
Prices of emerging-markets securities can be significantly more volatile than the prices of securities in developed countries and currency risk and political risks are accentuated in emerging markets.
There are no guarantees that dividend-paying stocks will continue to pay dividends. In addition, dividend-paying stocks may not experience the same capital appreciation potential as non-dividend-paying stocks.
Federated Securities Corp., Distributor
Copyright © 2015 Federated Investors, Inc.

Connect with us: LinkedIn YouTube iTunes