The question used to be how low can interest rates go. Now it’s how long can rates remain at their historic low levels?
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The question used to be, “How low can interest rates go?” Now it’s, “How long will interest rates remain at their historic low level?”
The Federal Reserve has said it plans to keep its target short-term interest rate near zero through late 2014. If the Fed sticks with its current plan, investors will have lived through an unprecedented six-year run of rock-bottom short-term rates.
When interest rates are low, keeping a large portion of your money in cash equivalents may not be the best course. It may be time to preposition your assets into other investments that have the potential to boost your portfolio’s overall rate of return.
For example, take a look at the dividend yield on the Standard and Poor’s 500. It was at 1.91% at the end of 2013, compared with 1.65% on the five-year U.S. Treasury note.
When reviewing a new idea or approach, it’s critical to have a good understanding of your investment goals, your time horizon, and your tolerance for risk. Are you uncertain about what moves to make in today’s low interest rate climate?
Give us a call and let’s discuss the many options available to you.
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