While the nation still reels from the Coronavirus sparked shutdowns, the Federal Reserve — which ultimately determines the rates in which the nation’s banks borrow money for their day to day operations — attempts to spur spending in a down market. The changes implemented by the Fed are felt across the country, and during times like these, investors may want to think about how they utilize these record-low interest rates for their properties. Additionally, the historically favorable U.S. treasury yields and mortgage rates have seen record lows throughout the pandemic, which investors can take advantage of.
What Exactly You Should Consider
There are some critical things to consider when you decide to invest during the current conditions. Historically, when interest rates reach these kinds of lows, investors anticipate seeing:
- Increases in bond pricing.
- Potential spikes in the stock market.
- Lower interest rates on savings accounts.
- Lower mortgage rates.
The TINA Effect
During economic downturns, investors subscribe to the TINA effect in terms of their stocks; in this context, TINA stands for There Is No Alternative. This means that for investors looking for more cash flow or increased retirement cash flow, equities such as bonds aren’t experiencing the same types of returns on investment that they usually would. In the face of this reality, investors tend to move towards stocks as sources of increased capital. With the lack of options for investors, the stock market may experience increases due to the TINA effect.
How to Brace Your Portfolio
As the low-interest rates of the current market entice you to invest, there are still things you may want to consider before making any move. Many investors look to ensure that they do not take any more risk than their portfolio is prepared to take. Since they do not want to take on more risk than their portfolio is built to sustain, they find it best to exercise prudence in the face of these enticing rates.
For a better financial planning approach, it may be wise to examine and review all of your income-producing investments. Taking the time to evaluate how these investments perform under conditions can help formulate a better investment strategy during the current financial climate. While spending time assessing income-producing investments, carefully monitor how the entire portfolio is currently performing. To gain a complete picture of your finances and how you can increase your profits during these difficult times, having the most up to date information about how it is currently performing is vital.
Are you searching for smart retirement investment options for your future? If so, contact Total Resource Financial today to learn how we can help you plan for your future!