Interest rates are a complicated subject. They are a mixture of free market rates established for different purposes such as compensating for risk, and they are centralized by having the fed set certain interest rates artificially. It is impossible to know exactly when or how to expect the interest rates to change, but one thing from history shows, that when the rates are too high for too long, they will eventually drop, when they are too low for too long, they will go back up. In the last two years, the interest rates have been chilling at historical lows for an extended period of time, history shows that eventually, the rates are going to rise. Here are a few things one can do to prepare for rising interest rates.

First, any investor or any person with fixed income resources who would like to hedge their saving should look to the stock market. When the interest rates rise, the commodities or the actual products used as the materials for other products will generally fall. This means that any company that has a large amount of things they produce from raw goods will see increases in their profits given the fact that their expenses are now lower and that competition does not drive down the price. A company that will experience a decrease in their expenses due to rising interest rate are considered hedges for rising interest rates. Real estate also starts doing better when interest rates increase as banks will lend loans a little more readily, the material to build homes is cheaper and so more homes get built at a more reasonable price. Lastly, stocks that are in companies that deal with a straight commodity like beef, chicken or pork are going to go up because it will be less expensive for farmers to produce those commodities and therefore they will make more money.

Another great concept to use or employ in order to do well against rising interest rates is a bond or a CD (certificate of deposit) “latter.” Bonds are simply a loan to a company and CD’s are simply a loan to a bank. Both a bond and and CD have a specific amount of time they will be in duration and they have a specific amount of interest they will pay and return at maturity. If one knows that the market interest rates are about to go up soon, then an investor could start putting a large amount of their money into a three month or ninety day CD and then every time that CD matures, they could then re-put the money in another CD at the new higher interest rate. This way, the money is gaining the maximum amount of interest available at the time instead of being fixed at a lower interest rate for a year or two.

Lastly, when the market or the interest rates are at a historic low, it is a super wise decision to refinance the home as soon as possible. Getting the mortgage interest rate down to below five percent and then putting money into things that will return at above five percent yet are relatively low risk is a wise decision.

A great guiding principle is to simply put money in investment tools that are typically low risk. Low risk instruments will typically start to pay out more in a high interest rate economy.

Author Bio: Juhlin Youlien writes about Fountain Hills AZ homes for sale and Paradise Valley AZ homes for sale.

Category: Finances
Keywords: homes for sale, real estate, buying a home, selling a home, loan, mortgage, foreclosurehomes for sal