Homepage / Investment / How to play rising interest rates based on your age
Amazon says this Prime Day was its biggest shopping event ever Kudlow says President Trump is 'so dissatisfied' with China trade talks that he is keeping the pressure on As stocks regain their footing, an ominous warning looms Goldman Sachs downgrades Clorox to sell, says valuation is 'unsustainably high' How Satya Nadella has spurred a tripling of Microsoft's stock price in just over four years Kudlow says economic growth could top 4% for 'a quarter or two,' more tax cuts could be coming The one chart that explains Netflix’s stunning comeback US housing starts plunge 12% in June to a nine-month low Aerospace titans Boeing and Airbus top $110 billion in orders at Farnborough Target uses Prime Day to its advantage, logging its 'biggest online shopping day' so far this year Billionaire Marc Lasry sees bitcoin reaching up to $40,000 as it becomes more mainstream and easier to trade These are the 10 US airports where you're most likely to be hacked Amazon shares slightly higher as investors await Prime Day results Wreck of Russian warship found, believed to hold gold worth $130 billion A bullish ‘phenomenon’ in bond market is weeks away from fading, top credit strategist says Stocks making the biggest moves premarket: MS, GOOGL, TXN, UAL, NFLX & more Twitter shares up 50% since late April means most upside priced in, analyst says in downgrade EU fines Google $5 billion over Android antitrust abuse Mortgage applications fall 2.5% as buyers struggle to find affordable homes America may not have the tools to counter the next financial crisis, warn Bernanke, Geithner and Paulson Investors are getting spooked as the risk of a no-deal Brexit rises EU expected to fine Google $5 billion over Android antitrust abuse Ex-FBI chief James Comey urges Americans to vote for Democrats in midterm elections Elon Musk apologizes to British cave diver following baseless 'pedo guy' claim Disney, Comcast and Fox: All you need to know about one of the biggest media battles ever Xiaomi shares notch new high after Hong Kong, mainland China stock exchanges reach agreement The trade war is complicating China's efforts to fix its economy European markets set for a strong open amid earnings; Google in focus Hedge fund billionaire Einhorn places sixth in major poker tournament The biggest spender of political ads on Facebook? President Trump Asian stocks poised to gain after Fed's Powell gives upbeat comments; dollar firmer Stocks are setting up to break to new highs Not all FAANG stocks are created equal EU ruling may be too little, too late to stop Google's mobile dominance Cramer explains how Netflix's stock managed to taper its drop after disappointing on earnings Airbnb condemns New York City's 'bellhop politics,' threatens legal retaliation Amazon sellers say they were unfairly suspended right before Prime Day, and now have two bad choices Investor explains why 'duller' tech stocks can have better returns than 'high-flying' tech names Elon Musk is 'thin-skinned and short-tempered,' says tech VC Texas Instruments CEO Brian Crutcher resigns for violating code of conduct Google Cloud Platform fixes issues that took down Spotify, Snapchat and other popular sites Uber exec: We want to become the 'one stop' transportation app 'What a dumb hearing,' says Democrat as Congress grills tech companies on conservative bias Amazon shares rebound, report says Prime Day sales jumped 89 percent in first 12 hours of the event How to put your medical history on your iPhone in less than 5 minutes Investment chief: Watch these two big events in 2018 Even with Netflix slowing, the market rally is likely not over Cramer: Netflix subscriber weakness debunks the 'sky's the limit' theory on the stock Netflix is looking at watch time as a new area of growth, but the competition is stiff Why Nobel laureate Richard Thaler follows Warren Buffett's advice to avoid bitcoin Rolls-Royce is developing tiny 'cockroach' robots to crawl in and fix airplane engines After Netflix plunge, Wall Street analysts forecast just tame returns ahead for the once high-flying FANG group Roku shares rise after analyst raises streaming video company's price target due to customer growth China is investing 9 times more into Europe than into North America, report reveals Amazon says US Prime Day sales 'so far bigger than ever' as glitch is resolved Netflix is on pace for its worst day in two years US lumber producers see huge opportunity, rush to expand San Francisco to consider tax on companies to help homeless Homebuilder sentiment, still high, stalls as tariffs, labor and land drive up costs Powell backs more rate hikes as economy growing 'considerably stronger' Netflix history is filled with big stock declines – like today – followed by bigger rebounds Intel shares get downgraded by Evercore ISI due to rising competition from Nvidia, AMD Petco aims to reinvent the pet store with something you can't buy online Genetic testing is coming of age, but for consumers it's buyer beware Tech 'FAANG' was the most-crowded trade in the world heading into the Netflix implosion, survey shows Netflix weak subscriber growth may indicate a 'maturity wall' that could whack the stock even more: Analyst This chart may be predicting the bull market's demise Wall Street says Netflix's stock plunge is a ‘compelling’ buying opportunity because the streaming giant ‘never misses twice’ Tesla sinks after Musk tweets, again Boeing announces new division devoted to flying taxis Stocks making the biggest move premarket: NFLX, UNH, GS, AMZN, WMT & more Deutsche Bank downgrades Netflix, but says big subscriber miss is not 'thesis changing' IBM is experimenting with a cryptocurrency that’s pegged to the US dollar North Korea and Zimbabwe: A friendship explained Virgin Galactic spinoff Orbit to launch rockets from the UK with space deal Artificial intelligence will create more jobs than it destroys? That’s what PwC says ‘Treasonous’ Trump and ‘Putin’s poodle:' Scathing headlines follow the Trump-Putin summit China’s fintech companies offer ‘enormous’ opportunity, investment manager says Trump's performance at summit with Putin was 'unprecedented,' experts say Walmart and Microsoft link up on cloud technology as they both battle Amazon European stocks seen mixed amid earnings; Fed’s Powell to address Congress How I knew I should quit my day job and run my start-up full-time: Viral website founder China's stocks have been trounced, but the trade war may ultimately be good news for those shares Billionaire tech investor Peter Thiel bets on crypto start-up Block.one Asian shares subdued open after mixed close on Wall Street; energy stocks under pressure Amazon cloud hits snags after Amazon Prime Day downtime Netflix isn't doomed by one quarter unless people start questioning the long-term investor thesis Tech stocks set to sink on Tuesday after rough evening for ‘FANG’ Netflix plummets after missing big on subscriber growth This wristband lets humans control machines with their minds The U.S. has a rocky history convincing Russia to extradite computer criminals Amazon suffers glitches at the start of Prime Day Jeff Bezos is now the richest man in modern history 'The United States has been foolish': Read Trump and Putin's full exchange Goldman Sachs recommends these 5 highly profitable companies — including Nvidia — to combat rising inflation Goldman Sachs releases 'tactical' stock picks for this earnings season Three red flags for Netflix ahead of its earnings report The bond market may be raising recession fears, but don't expect one anytime soon Cramer: Banks are 'making fortunes' but are still as hated as they were during the financial crisis Putin told Trump at summit: Russia never meddled in US election

Investment

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.