'Do not panic': Experts explain how to stay calm and carry on investing amid rising interest rates
Last week the Reserve Bank of Australia (RBA) has raised the official cash rate by 25 basis points to 0.35%, amidst a backdrop of rising inflation. The RBA's Board also said that there will be further rate increases to come.
This follows on from moves by the United States Federal Reserve and other leading central banks to increase their nations' interest rates, with most banks hiking rates for the first time in a decade or longer.
At the current inflation rate, the cost of living in the United States will double in just over 8 years and in Australia in 14 years.
Investing in an era of rising interest rates will be brand new territory for some ASX investors.
Investing in an era of rising interest rates will be brand new territory for some ASX investors.
Successfully investing with interest rates forecast to keep climbing requires a different strategy than investing in a year with falling interest rates.
So, what's an investor to do?
So, what's an investor to do?
1. Look beyond the noise and do not panic
Adrian Frinsdorf, the director at William Buck Wealth Advisory, says that investing with higher interest rates offers "both challenges and opportunities", with no real changes to the underlying fundamentals of investing.
According to Frinsdorf:
According to Frinsdorf:
It's important to remember that wealth can be generated in this new environment. After all, one of the reasons for the rate rise in the first place was the strong performance of the economy.
An objective, patient and well-informed approach focusing on quality assets is the key to long-term wealth creation. It's important that investors look beyond the noise and do not panic.
An objective, patient and well-informed approach focusing on quality assets is the key to long-term wealth creation. It's important that investors look beyond the noise and do not panic.
2. In it for the long haul, or time to cut and run
When looking at investing with higher interest rates ahead, your investment horizon is another critical factor to consider.
"Those with a long-term outlook may not feel the need to adjust their portfolio, given that this is a cycle and they are looking 15-20 years ahead," according to the market analyst Josh Gilbert.
"On the other hand, the assets that investors purchased in 2021 may not have the same outlook now that rates are starting to rise, so now is a great time for investors to reassess their portfolios," Gilbert adds. "Banks and financials tend to perform well in rate hike cycles, this is because higher interest rates are generally beneficial to banks since they allow them to earn more net interest income."
Mooers, any investment strategies want to share at this time?![]()
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Are you in the position of choosing between buying stocks or an ETF? And do you consider investing in crypto?![]()
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Source: The Motley Fool
"On the other hand, the assets that investors purchased in 2021 may not have the same outlook now that rates are starting to rise, so now is a great time for investors to reassess their portfolios," Gilbert adds. "Banks and financials tend to perform well in rate hike cycles, this is because higher interest rates are generally beneficial to banks since they allow them to earn more net interest income."
Mooers, any investment strategies want to share at this time?
Are you in the position of choosing between buying stocks or an ETF? And do you consider investing in crypto?
Source: The Motley Fool
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only.
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Heartstrings : good share
Pauly Atherton : Meta Moo :【Earnings 101】How do value investors respond when market fluctuates?
https://www.moomoo.com/community/feed/105831483965445?data_ticket=12a0e50f1dd58466ea8a9c75276027fc&futusource=nnq_details_topic
affectionate Orangut : Hmmm, not much conclusion after reading.