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How can I invest to make money on rising interest rates?
5 Answers
- HoratioLv 71 decade agoFavorite Answer
A safe way of doing this is to ladder short term certificates of deposits.
EXAMPLE: Starting out with just $6,000 that you won't need to withdraw.
Invest $1,000 in January for 6 months.
Invest another $1,000 in February for 6 months (interest rates will be higher).
Invest another $1,000 in March for 6 months (interest rates will be higher).
Invest another $1,000 in April for 6 months (interest rates will be higher).
Invest another $1,000 in May for 6 months (interest rates will be higher).
Invest another $1,000 in June for 6 months (interest rates will be higher).
In July, the $1,000 you invested in January has matured. Roll it over for another 6 months CD at a higher rate.
In August, the $1,000 you invested in February has matured. Roll it over for another 6 months CD at a higher rate.
And so on and so on.
The higher the amount you deposit each month, the higher will be the interest rate, even though you are investing just for 6 months.
- falsi fiableLv 71 decade ago
The value of a bond drops as interest rates rise. You need to make some type of opposite investment.
- 1 decade ago
You can do it in a lot of ways
list from riskest to the safest
1.Buy interest rate products (derivatives) such as the Eurodollar futures, contracts on fed funds
2.Shorting treasury futures (derivatives)
2.Shorting bonds (like buying the ETF "TBT")
3.Getting more positions in gold (like GLD)
Source(s): http://www.cmegroup.com/ (for interest rate linked derivatives products) - 1 decade ago
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