Interest rates are rising so how should I invest my money?
Interest rates rising currently and you might be wondering whether you should bank your cash or look to investing your money in shares.
Rising inflation is one of the catalysts causes interest rates to rise. Another factor behind the rise in interest rates is to encourages people to save more.
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Interests rates can rise when economies immerge out of rescissions. On the other hand they can also rise when entering deep economic stagflation.
There are of course winner and losers when interest rates rise.
Those on varied mortgage terms will likely experience increased in their repayments. However this is mitigated by increasing property prices.
If there is a housing price crash then this could lead to many repossessions. In this instance the banks stand to profit, moreover the banks that then hold on to those assets until the housing market rises again.
In my view banks will become a good investment given they stand to make more money on mortgage interest repayments.
As well as being cash rich from increased savings thereby able to invest more on the stock markets. Additionally the interest rates of personal loans and business loans will increase.
Everything of course is still in flux, but if you pan out and view the cycles of ups and downs in interest rates you maybe able to see that the days of 0.25 per cent are over.
As currencies move away from physical money to a centralised blockchain controlled by world governments, more taxes can be collected.
Also it will become much more difficult for oligarchy to get away with stashing their ill-gotten gains.
Thus with more money tracked and accounted for, the more governments stand to gain as wealth remains with the banking system.
Both the Federal Reserve for the US and the Bank of England for the UK have raised interest rates. Other countries are set to follow suit including the European Central Bank.
Is this a good time to invest in stocks?
In my view the short answer is yes.
While energy prices, crude oil, natural gas prices are probably going to remain high, fares well for the stock market as a whole.
Therefore as well as investing in bank stocks I would look at investing in oil companies too. I would expect stock price will rise thus pushing up stock markets to reach new record highs.
With a boosted stock market, you could profit from rising share prices in addition to all the meaty dividends you would expect to receive.
On the whole a savvy stock investor should expect around 7% on dividends and around the same with share price value increases.
If you factor in compounding interest with reinvested dividends, and topping up on the dips to lower your average, overtime you should expect to make 20% gains year on year.
This is, so long as you select the right stocks and stick to a good investing strategy. If you can pick a few growth stocks in your investing portfolio, you could be in for a lot more profit over the years.
With interest rates likely to continue to rise I would steer clear of investing in bonds. Bonds tend to fall under such conditions.
Pick up bonds when they are at rock bottom and that bottom will be when interest rates are at an all time high, having been for some years and when a reset is likely. The cycles are normally every 7 to 10 years.
Stocks are rising, as are stock markets. There’s no guarantee that they will not experience further crashes albeit mini stock market crashes.
But on the whole, within the normal workings on the world economic cycle, I would expect to see stocks rise as well as stock markets.
I would invest in tech stocks as well and in energy and banks. But choosing the right tech stocks is a bit if a minefield given they are at peak bubble and a tech crash is well overdue.
Advertising tech stocks could be a good bet as well as mobile and internet communications. Try to invest in more established tech stocks.
Real estate price could be in for a windful so long as your able to invest in real estate stocks not subject to further corona lockdowns.
If interest rates continue to rise, and make all time highs, I would expect to do pretty well by investing my money in the stock market. Of course I’m going to hold a lot of cash too in banks to profit from raising interest rates.
But I will always be ready to utilise my bank savings to invest in stocks with bargain share prices.
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