As investors anticipate more interest rate hikes this month, the market goes back to bumpy — but last week ended on an up note.
What about bonds? Last week saw rising bond yields, or returns. Learn why this matters, and how you can take advantage.
First, what are bonds? Bonds are essentially loans you provide companies or governments in the form of investments. The companies or governments agree to pay you back by a certain time, plus interest.
The interest rate hikes that we’ve seen from the Fed so far this year have led to higher bond yields (returns) and lower bond prices.
So, as the Fed continues to raise rates, new bonds will pay more interest, and older bonds will cost less.
Eventually, we expect the rate hikes to slow down, taking the pressure off of bond prices.
In the meantime, investors can benefit from older, cheaper bonds or newer, higher interest bonds.
Bottom line? Recurring Investments in a diversified portfolio that includes both stocks and bonds can help you benefit long-term from unpredictable market movements.
While last week’s inflation report confirmed that we hit a 41-year high in June, there are a few signs that we’re moving in the right direction:
As we continue to ride these market waves, remember, selling during a dip can lock in losses. If you stick with it, you give any short-term losses the potential to recover — and even grow!
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