How You Can Benefit from Imminent Interest Rate Hike
Times, they are a-changing. The historically low interest rates that have made investment harder but life easier are about to go up.
For many people, interest rate hike can seem like a bad thing, but that’s not actually the case. There are plenty of good things to be found when the Fed decides that the economy is strong enough to bear a higher interest rate, and they’re not all related to making investments.
Of course, taking a dedicated portfolio investment approach to your investment ensures that you can use bonds to build wealth no matter what the interest rate does.
Interest Rate Hikes Are Coming
Sure, investors have heard it before – the Fed is going to raise interest rates at some point. However, they never seem actually to happen. Well, there’s good news (at least for investors). Interest rate hikes are going to happen, and they’re going to happen soon.
The Fed is expected to raise interest two to three times in 2016, moving it up incrementally from historic lows to something more on par with where things should be. That’s actually good news, and not just for Wall Street. It’s good news for just about everyone.
Higher Returns on CDs and Bonds
We’ll start with probably the most obvious benefit of interest rate hikes – your investments will earn more money. If you were savvy enough to invest in bonds through a dedicated portfolio investment approach, those rate hikes are a huge boon.
This is particularly true for retired individuals and those approaching retirement, as well as for other investors who are risk averse. A simple interest rate hike means that your CDs and bonds will be earning you more money, without you having to take any other action.
The more interest your investment earns, the more easily you can cover the cost of living. Of course, if you haven’t taken a dedicated portfolio investment approach to building your wealth, looming hikes might not be good things.
Now might be the time to consider putting some cash into CDs and bonds so that you can benefit no matter what the Fed decides to do.
Cheaper Goods and a Stronger Dollar
Interest rate hikes mean that the dollar is strengthening. That means you’ll be able to make your money go further, and that the goods you buy every day will be cheaper particularly imported goods. And considering the amount that the US imports every year, that’s a great thing.
It applies to everything from fruit imported from Mexico to French wines and Chinese-made electronics. Consider the fact that almost everything in our lives today is imported, from the fruits and vegetables you buy at the grocery store to the smartphone you carry in your pocket, and the TV you enjoy in the evening.
A Stronger Dollar Means More Affordable Travel
Have you been putting off that trip to Italy or Greece because of the cost? Well, interest rate hikes mean that the dollar will increase in strength, and travel becomes that much cheaper. Whether you want to tour the city of Rome, the countryside around Tuscany, or head over to Beijing, you’ll be able to afford it more easily.
Everything about travel becomes cheaper, from airfare to rental cars to hotel rooms. If you’ve got the travel bug, then you can most certainly benefit from the upcoming interest rate hike.
It Costs Less to Fill Your Tank
Interest rate hikes don’t just mean that international travel costs less. They also mean that traveling at home is cheaper. When the dollar strengthens, and interest rates are higher, the price of gas drops, as well.
That means you’ll pay less to fill up the tank, and you might not have to worry about downsizing from an SUV to a subcompact with no room for your suitcase in the trunk. As CNN Money pointed out recently, a stronger dollar might just send oil as low as $20 per barrel, which is excellent news for Americans sick and tired of paying more at the pump.
It Makes Your Property More Valuable
Thinking about downsizing your home and finding something more in line with your life as a retired individual? No longer need all that extra space now that the kids have grown up and moved out on their own? If that sounds familiar, you’ll be glad to know that interest rate hike can have a very positive effect on your ability to downsize.
Increasing rates mean rising mortgages, which means there is greater demand for property from sideline buyers. That’s good news for people like you, hoping to downsize and buy something smaller.
You’ll actually be able to get more for your current home, allowing you to not just buy another, smaller home, but to put away a little extra cash from the sale as well. A related benefit here is that with a higher interest rate, lenders will be more willing to extend credit and more loans will be made.
When Will Interest Rate Hike Happen?
Right now, no one is 100% certain when the interest rate will bump up, although there’s a lot of very informed speculation that the first such hike could happen as early as in December 2016.
Of course, the economy needs to stay on a strong footing for that to happen, but all signs are pointing to at least one hike this year, with up to two interest rate hikes next year more than likely.
The most important thing to remember is that those hikes are actually good things in the long run.
The stronger the dollar is, the easier life becomes, particularly for anyone living on a limited income and interested in making their money stretch as far as possible.