Rising Rates and Your Investments

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Essay (Name) (University) Rising Rates and Your Investments Part I: Issues that I already know The interest rates in the bond markets keep on changing from time to time. This is as a result of various activities in the bond markets and a combination of factors that include shifts in the demand and supply of credits, policies enforced by Federal Reserve, inflation, prevailing conditions of the economy, the rates of exchange of various currencies and fiscal policies. Presently, the prices of bonds are affected by increasing rates of interest and prospects of economic recovery. The changes in interest rates affect the values of bonds in the stock markets. Therefore, for a person considering buying bonds, it…show more content…
The total return on bonds consists of both variations in prices and interest payments. Increase in interest rates negatively affects the bond fund as it leads to drops in the value of bonds. Even though the rates increase, the bonds will continue receiving interest payments due to the bonds held which are regularly passed to the investors. Investors in bond funds delight in good management and diversification of assets. Trading in bonds has a number of risks which must be considered before investing. The rise in interest rates is the most feared risk in bonds which can even lead to loss of some or all of the investment value. It must also be borne in mind that investment in bonds that are not government-guaranteed has some risk considerations since the return on investment has a direct relationship the bond’s credit and changes in the market. On the other hand, investments that have low risk factors have lower returns. Bonds range from the U.S Treasury securities that are secured by the government and have no risks to the speculative ones whose rating is below investment grade. The most important thing when investing in bonds is to forecast and measure whether the investment will be available at a later date when it will be needed. For somebody who wants to buy bonds at the moment, it is important for them to know that diversification in business is one of the ways of reducing investment risks. It is

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