How do interest rate changes affect my investments?

How do interest rate changes affect my investments?

Interest rate changes can significantly impact your investments. When rates rise, borrowing costs increase, which can slow down economic growth and affect stock prices. Conversely, lower rates can stimulate investment and spending.

Can you explain how it affects bonds specifically?

Certainly! When interest rates rise, existing bond prices typically fall because new bonds are issued at higher rates, making older bonds less attractive. This inverse relationship is crucial for bond investors.

What about real estate investments?

For real estate, higher interest rates can lead to higher mortgage costs, which may reduce demand for housing and slow down price growth. Lower rates usually encourage more buying and can boost property values.

Are there any investments that benefit from rising rates?

Yes, certain investments like financial stocks and short-term bonds can benefit from rising interest rates, as they may see improved profit margins and higher yields.