You may wonder if negative returns mean that your investment has gone bad. Rising interest rates do not mean the quality of the fixed interest investment has changed, and it is normal for the interest rate cycle for the value of fixed interest investments to rise and fall.
It is a normal part of the interest rate cycle for the value of fixed interest investments or bonds to rise and fall over time. Rising interest rates don’t necessarily mean that the quality of the fixed interest investments in a portfolio has changed. Like before, issuers are still expected to keep paying the fixed rate of interest. When the bonds in your portfolio reach the end of their term, the issuers are expected to return the total value of the amount invested in your fund.
Other risks of fixed interest investments include:
Credit risk: when the issuer may be unable to make future income or principal payments.
Inflation risk: when inflation rises, an investor in bond will require a higher return on the investment to compensate for the effects of inflation.
Liquidity risk: when the bond may not be able to be sold quickly for a price that represents its market value.
At Bluerocke, we are very experienced in helping High Net Worth, soon-to-be High Net Worth and want-to-be High Net Worth professionals and business owners.
Please contact us through our web-site www.bluerocke.com, if you need such help.