Tips to help you deal with higher interest rates
With the Federal Reserve raising interest rates, many Hudson Valley households are wondering how the increase is going to affect their bottom line.
Pace University economics professor Mark Weinstock says the Fed has kept interest rates low for as long as it did to promote spending during the downturn of the pandemic. He says it is a little late in raising the rates, and he thinks it should have been raising rates gradually as the economy improved.
Weinstock says the problem now is that the Fed has to play catch up quickly. He says the new rates will cause stocks to be worth less, make 401(k)s, stocks and bonds worth less (which will be a problem for people retiring soon), slow spending as people put off vacation and big purchases, and will increase mortgage rates.
Weinstock gave News 12 some tips that will help the average person:
- Don't panic. You will wind up making poor decisions.
- Don't fall for fads like cryptocurrency.
- Invest in a diversified portfolio
- Companies of the future are going to be an important part of the economy
- Commodities would be good to look into for 401(k)s and other investments
- If you invest in things that are going to be used in battery technology, like nickel, cadmiums, selenium, lithium and precious metals...these traditionally do better in an inflationary cycle and are alternative investments when people feel they can't get a return from the stock market or bond markets.
"The Treasury allows individuals to buy up to $10,000 of TIPS. TIPS are Treasury Inflation Protected Securities, and I believe they're paying about 10% now...So you'll get 10% a year on that, which is certainly a lot better than what you can do without any risk at all from the stock market and bond market," says Weinstock.