Sunday, January 5, 2014

How To Invest as Interest Rates Rise? Keep It Simple Stupid

I just read a real long article in the Wall Street Journal with all sorts of strategies for investors who are expecting a rise in interest rates.  Some of the recommendations:

1. Sell high income sectors like utilities and telecom and buy sectors that can increase earnings
2. Stay away from Treasuries and MBS and look for beaten down munis
3. Resist the temptation to load up on short term debt
4. Lean towards economically sensitive sectors---consumer discretionary, energy, and financials
5. Watch out for emerging stocks and bonds
6. Be careful of commodities
7. Use a bond barbell to have a portfolio duration of 4-5 years

Investors could take a ton of time to dissect all this advice and try to create a portfolio that follows it to the letter, or they could just look where the momentum is and follow market trends and not worry whether rates are going up or going down.

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