Homepage / Investment / How to play rising interest rates based on your age
Buy Cisco on the dip because the Amazon threat worries are ‘overdone’: Bank of America Strong retail sales report suggests robust economic growth in the second quarter Tech consumers should not be forced to sacrifice privacy for security Why your Amazon Prime membership may not be worth the price Netflix draws its second 'sell' rating on Wall Street as Buckingham downgrades before earnings With bank earnings underway, market watcher bets on big rally for financials Stocks making the biggest moves premarket: BLK, BAC, UPS, FDX, JBHT & more Thai rescue mission diver mulls legal action after Elon Musk calls him 'pedo guy' Trump claims US-Russia relations have ‘never been worse’ shortly before Putin meeting China will be watching and learning as Trump meets Putin Amazon Prime Day threatened by strikes at European warehouses over working conditions While Trump meets Putin, China is reaching out to Europe Trump-Putin summit could provide a ‘significant breakthrough’ on Syria, strategist says How cryptocurrency start-ups have raised over $12 billion this year via a much-hyped funding route For Asia's soccer teams to succeed, work starts off the field European markets seen higher ahead of earnings; Trump-Putin meeting in focus How start-ups are positioning healthy food to make 'a lot of business sense' 'Never underestimate human stupidity,' says historian whose fans include Bill Gates and Barack Obama China says its second-quarter GDP growth was 6.7%, meeting expectations Asian stocks poised for slightly softer open as markets await China data Elon Musk courts new controversy after tweeting, then deleting, an attack on a British cave explorer How a former eBay employee is inspiring kids to become tomorrow's problem solvers Here's what the DOJ needs to happen to win its appeal against AT&T The 2018 Hyundai Tucson is a good bargain crossover but skip the high-end model Trump suggests US and UK could strike a 'tremendous' trade deal after Brexit PlayVS wants to bring electronic sports gaming into high schools The unintentional winners of Prime Day: Amazon’s competitors Elon Musk insists he's neither Democrat nor Republican, as political contributions come under fire Amazon could make a big impact in health by helping people eat better Even without a GPS, here's why mobile phones are 'the best spying device you can imagine' How the Bee Gees plan to stay alive in the era of digital music Verizon, AT&T, Sprint and T-Mobile say they have unlimited data plans, but here's the fine print Elon Musk has a new interest group that could be added to his list of enemies: Cabbies Uber's troubled culture persists, as sensitivity 'blind spots' raise new questions Top VC Deals: Uber and Alphabet backed Lime, Larry Page invests in personal aircraft company Tesla rolled out a new attendance policy for hourly workers this month — read it here Elon Musk: Whatever pain Tesla factory workers felt, 'I wanted mine to be worse' Facebook, Google and Twitter will testify next week at a House Judiciary hearing on content moderation In ETFs, the bigger the stock, the more money goes into it and that could be costing regular investors Ex-Labor secretary: Cash handouts 'may seem like a pipe dream' but could be 'inevitable' Cisco, networking stocks drop on a report Amazon Web Services is developing its own network devices Microsoft's president says the government needs to step up regulation of face recognition technology Facebook admits it's not adding enough minority engineers, says the problem may lie with its roots The 2018 Cadillac ATS-V is one of the best sports sedans you can buy There’s one media stock that’s outperforming Netflix Trump's SCOTUS nominee thinks ISPs have First Amendment rights, which could hurt privacy laws The bond market is sounding an alarm on the economy as 'yield curve' spread hits narrowest in 11 years on Friday India execs raise concerns about potential trade war with US Watch out, retailers. This is just how big Amazon is becoming Jefferies raises Facebook price target, sees revenue topping expectations An Amazon Prime Day for health care? Here's what experts say it could look like Can money buy success at the World Cup? Children and PTSD: Health risks linger long after acute psychological trauma ends Netflix faces major risk heading into earnings, money manager says Morgan Stanley raises its price target on red hot WWE stock by nearly 70% to Street-high Trump walks back Brexit threat: 'Whatever you do is OK with us' 4,500 tech workers, 1 mission: get Democrats elected Watch: Trump holds news conference with UK Prime Minister Theresa May after he attacked Brexit plan Goldman Sachs says cybersecurity stocks could get a boost from fears of meddling in the midterm elections AT&T's Randall Stephenson says chances of a successful DOJ appeal are 'remote': 'This changes nothing' PNC shares gain after higher commercial lending leads to better-than-expected earnings report Amazon just hit a new high, and one trader sees more to come Stocks making the biggest moves premarket: JPM, DIS, BLK, T, JNJ, MCD & more Deutsche Bank warns Netflix may miss second-quarter subscriber expectations Wells Fargo shares fall after second-quarter revenue misses estimates Trump’s dream to meet the queen makes this trip a victory, former White House aide says In this earnings season, a volatile stew of expectations London mayor says the UK is not afraid to call out Trump: ‘We think you’re wrong’ ‘Trump Baby’ balloon takes flight in central London amid protests Even May's UK opponents are backing her against Trump Theresa May had a plan in place for Brexit. Then Donald Trump landed Jack Dorsey loses 200,000 followers on Twitter after fake user purge Trump to have tea with the queen at Windsor Castle The US is trying to nail down terms with Pyongyang, while 'South Koreans aren't wasting time' Trump is likely to ask Putin for help with his North Korea problem European markets seen higher amid global trade war fears; Trump visits the UK History shows the US-UK special relationship is increasingly one-sided New tariffs threatened by the US would be more harmful to China than the first batch, says bank CEO Chinese imports fall short of expectations, while exports top estimates China says both its imports and exports with the US rose in the first half of the year Asian stocks extend gains amid relief over lack of trade escalation, tracking US rally Nvidia and Netflix produced top shareholder returns over past five years, BCG study shows Apple announces $300 million clean energy fund in China Broadcom has a new strategy after failing to buy Qualcomm: Roll up enterprise software companies Justice Department appeals Time Warner-AT&T merger approval Women in private Facebook group for cancer gene carriers found marketers could get their names How to avoid overshopping on the longest Amazon Prime Day yet Microsoft challenges Slack with a free tier for Teams Amazon, Xealth working on pilot program to deliver products to patients after hospital discharge Trump's tariffs are unlikely to cause a recession because they are leaving the most important part of the economy alone There are a lot of misconceptions about browsing the web in 'incognito' mode, researchers say How an obscure British rule — the 'chain principle' is changing Comcast's strategy for Fox and Sky Netflix just beat out HBO in Emmy nods, snapping HBO's 18-year streak John McCain blasts Trump’s NATO performance and warns that 'Putin is America’s enemy' Two Dow stocks to buy and one to fade in a volatile market Uber will let riders pay with a Venmo balance Cramer: Pizza execs say Papa John’s is ‘falling apart’ when compared with Domino’s This 23-year-old founded a company with self-driving car tech that's giving Tesla some competition NBA Commissioner Silver ‘rooting’ for Disney in the battle against Comcast for Fox L Brands tumbles after weak sales at 'broken' brand Victoria's Secret


How to play rising interest rates based on your age

The Federal Reserve’s decision to hike short-term interest rates is big news for investors.

The Fed raised the federal funds rate a quarter percentage point — to 2 percent, from 1.75 percent — last week and signaled that it plans another two hikes this year.

The change brings the rate — which sets the terms for how much you pay on the money you borrow and the money you can earn on savings — “closer to normal historical levels,” said Rob Williams, director of income planning at Charles Schwab.

But what you should do with that change depends a lot on the stage of life you are in.

Many investors who are just starting out grapple with a four-letter word: debt.

If that’s you, you want to watch the interest that you are paying on your credit cards and student loans.

If the money you are charged for using your credit card gets too expensive, shop around for a better deal.

Also take a look at your debts from college or graduate school. If you have a federal loan, those rates will be fixed and will not change.

But if you have a variable-rate loan, you will see the interest rates on that debt increase. Now could be the time to lock in a lower rate.

You should also look to start an emergency fund of three to six months’ living expenses. The good news is that the short-term rate increases will push up the yields on savings and interest-bearing checking accounts, Williams said.

“You’re going to earn a little bit of a return on that now, 1 [percent] to 2 percent potentially, because the Fed is increasing rates,” Williams said.

Keep in mind that you will want to shop around for the best deal when it comes to those accounts, said Scott Hanson, co-founder and senior partner at Hanson McClain Advisors.

“The banks have been very slow to increase rates on their savings accounts” because of the money they are earning on cash deposits, Hanson said.

Online, community or regional banks offer the most competitive deals, while large national banks’ rates have yet to catch up, Hanson said.

If you have already put in some years in the workforce, chances are you own a home or are planning to own a home.

Those who have a variable-rate or adjustable-rate mortgage may want to change those terms.

“[That way], if mortgage rates do rise or the Fed continues to raise rates, you’re not surprised by a much higher mortgage payment,” said Williams at Charles Schwab.

If you’re looking to buy a home in the next couple of years, watch how those funds are invested.

The same goes for other near-term goals, such as 529 college savings plans for children who are set to go to school in the next couple of years.

If you’re going to need the money soon, avoid investing heavily in riskier investments, such as stocks, Williams said.

Investors may want to consider putting that money in bonds instead. But be sure to match the maturities of the bonds to your investment time horizon, Williams said.

You generally want to avoid taking chances in the bond market, such as with junk bonds and long-term bonds, and reserve those risks for the stock side of your portfolio, said Hanson at Hanson McClain Advisors.

“For people who haven’t done any in-depth analysis on their portfolio, now would be a good time to do so,” Hanson said.

For retirees, rising rates are good news for one reason: income.

“On the investing side, rising interest rates has most impact for those who are nearing or in retirement, because a lot of them look to interest payment or are looking for income to support their spending,” Charles Schwab’s Williams said.

Those investors will benefit as rising rates increase the money they make on certificates of deposit or savings accounts.

“It’s not going to outpace inflation, but it provides some stability,” Williams said.

At the same time, they should also aim to strike a balance between investing conservatively in bonds and taking some risk in stocks, Williams said. Consulting a financial advisor can help you identify exactly the right balance for you.

Rising rates will also make it more expensive to borrow a home equity line of credit in retirement. “Downsizing a home might be a better course for many people,” Williams said.

More from Personal Finance:

Here’s what the Fed rate hike actually means to you

With Fed rate hike at a quarter point, here are some ways to make your money last in retirement

Older Americans planning to downsize should brace for sticker shock

Source: Investment Cnbc
How to play rising interest rates based on your age

Comments are closed.