News is buzzing with fear of rising interest rates and its impact on the US economy. Some concerns are warranted such as increased borrowing costs for personal debt and growing national debt. However, for most investors rising interest rates is not necessarily bad. It’s generally considered a sign that the economy is doing well. Additionally, investors and savers can benefit from increasing interest rates:

  • Increasing Bond Returns (over time): It’s easy to make a broad stroke statement about rising rates — an increase in interest rates correlates to a decrease in bond prices, which is a negative. But as interest rates increase, newly issued bonds come with higher interest payments. For investors holding short-term, high-quality bonds, the result should be short-term fluctuations in value but eventually recovering with higher returns over the long-run.
  • Increased Savings Rates: Investors have seen abysmal returns on their savings accounts or CD’s over the past few years. As interest rates rise, investors are beginning to see returns on their savings increase.

Increasing interest rates is out of an investor’s control. For those who have a financial plan with a coordinated investment strategy, it is manageable.

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