How Sensitive Are Your Holdings?

July 16, 2013
by Michelle Perry Higgins

Start Shopping for Long-Term-Care Insurance at 45What advice would you give to investors worried about rising interest rates?

We all know that rates may increase in the near future, so instead of worrying, let’s plan ahead. To do this we should first assess the investor’s portfolio, make any adjustments that are necessary, and then tackle the financial plan. In preparation for rising interest rates, investors should review their fixed income holdings and understand the sensitivity each one has to rising interest rates. Armed with that information, they can evaluate the trade-off between shortening the duration, which may come with a lower yield, versus investments with higher income but more interest rate risk. They may also want to consider alternative investments as an added buffer within their portfolio.

When it comes to an investor’s financial plan, it is critical to review all debt being held, such as mortgages, student loans and personal loans. Are these financial obligations at the lowest possible fixed interest rate? If not, it might be wise to review possible options with a financial planner and mortgage broker.