How do interest rates affect my investments?
Fixed interest investments such as government and corporate bonds will decrease in capital value as interest rates rise. Conversely lower interest rates can mean an increase in capital value of bonds however as the interest rate is lower, often so is the yield.
When interest rates rise, the countries dollar generally strengths against other currencies. i.e. If Australian interest rates rise then the Australian Dollar will generally strengthen. This can then reduce returns from global shares for Australian investors as overseas investors are attracted to the higher yield in investing in Australian equities/currency.
Conversely, the reverse occurs when interest rates fall. Still using Australia as an example this means Australian commodities and exports are more affordable for offshore buyers.
Please know, the value of investments can go up as well as down and you may receive back less than your original investment, meaning, when investing your capital is at risk.
Disclaimer: At Evarvest we believe in making investing and investment education more accessible, but we don’t provide investment advice and individual investors should make their own decisions. While we try our best, we cannot ensure the accuracy of the information we provide.
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