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With Fed poised to act, here's how investors can prepare for higher rates


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The higher risk bonds are perhaps going to find folk going back to the more stable CDs and performance savings accounts.

 

Excerpt:

 

"It has been nearly a decade since investors have had to contend with the Federal Reserve raising interest rates. Or, from savers' viewpoint, it has been that long since the Fed did them a favor.

But Wall Street's No. 1 obsession this year is guessing how soon the central bank will start lifting its benchmark short-term rate from near zero — and, more important, how financial markets will fare when that day comes.

Predictions of investors' reaction range from Armageddon to a nonevent.

Many economists believe the Fed is eager to begin raising rates, if just to give itself some ammo in the event of another crisis. If its key rate were back to 1%, for example, policymakers would be able to cut again to zero to offset an unexpected economic calamity.

The justification for boosting rates, however, has to be rooted in an improving economy.

"I believe a decision to raise rates would signify very clearly that the U.S. economy has made great progress in recovering from the trauma of the financial crisis," Fed Chairwoman Janet Yellen said in June.

 

She added that she expected a rate hike to be "appropriate later this year."

 

What will happen with your investment nest egg when the Fed finally pulls the trigger? The cash portion of any portfolio should begin earning a better interest rate.

 

The bond market and stock market, however, will have to brace for potentially dramatic upheaval. Here's a look at what investors in bonds and stocks could face, and how to prepare:"

 

Tom goes on to cover the impact on bonds and bond funds, stocks and stock mutual funds,and much more in the rest of this comprehensive article here: http://www.latimes.com/business/la-fi-iq-investors-20150705-story.html#page=1

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