Writing about investing in a low rate environment got me thinking about the college rafting trips on the Colorado River I took with a group of friends. Our experience each year was based on two factors: the amount of water running and the parts of the river we chose to discover. Some runs were more exciting than others depending on the river conditions and the choices we made, but each trip included both slow-moving stretches and unforgiving rapids.
With historically low interest rates, it is not a question of if, but when rates will return to more normal levels. Such a rise in rates has many people concerned with how to properly align and protect their investments. “What can I do if my portfolio isn’t keeping up with inflation?” “CDs aren’t paying what they used to—now what?” “I want to invest in bonds, but am not sure what I should do.” If these or other questions about investing in today’s market are on your mind, read ahead. There are always opportunities in any market condition regardless of your risk tolerance and investment objective—if you know where to look…
Investors, especially those seeking income, are faced with the challenge of positioning their portfolios in today’s historically low interest rate environment while preparing for the inevitable rise in rates. While most market strategists agree that rates have nowhere to go but up, the question is really around timing and severity—when will they move and how quickly.
In recent months there has been substantial media attention focused on a possible wave of municipal defaults. The litany of budget challenges for local and state government is very real; however, the likelihood of a cascade of defaults for essential government entities is slim.
Plain and simple, investing carries risk. However, many people are willing to accept investment risk in hopes of generating a positive return or income—as the old saying goes, “nothing ventured, nothing gained.” The key to successful investing lies in identifying, understanding, and managing risk. Investment risk comes in many forms; interest rate risk, security risk (the volatility of an investment), and portfolio risk (the diversity of a collection of investments) are three related but distinct types of risk to consider.
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