Insights and Market Perspectives

Understand interest-rate risk

Author: Sound Choices

May 23, 2018

Investors usually look to fixed-income investments to provide a safer haven from equity market fluctuations. However, investors need to be aware of the risks associated with fixed-income investments, particularly interest-rate risk.

What some investors may not understand is that when interest rates rise, bond prices go down (and vice versa).

How active management can help

These uncertainties do not mean that all fixed-income investments are equally vulnerable to interest-rate risk. There are a number of ways that active fixed-income managers can minimize the impact of a rising interest-rate environment and still search out attractive opportunities.

For example, rising rates can have more of an impact on longer-duration bonds (i.e., bonds with a maturity of 10 or 20 years) than shorter-term bonds. Therefore, if expectations are that interest rates are going to rise, managers can invest in government or corporate bonds with shorter maturities (i.e., in the one- to five-year range).

 


To learn how you can diversify your fixed-income portfolio, talk to your financial advisor or read “Increasing Yield” at AGF.com.


The contents of this Web site are provided for informational and educational purposes, and are not intended to provide specific individual advice including, without limitation, investment, financial, legal, accounting or tax. Please consult with your own professional advisor on your particular circumstances.

About AGF Management Limited

Founded in 1957, AGF Management Limited (AGF) is an independent and globally diverse asset management firm. AGF brings a disciplined approach to delivering excellence in investment management through its fundamental, quantitative, alternative and high-net-worth businesses focused on providing an exceptional client experience. AGF’s suite of investment solutions extends globally to a wide range of clients, from financial advisors and individual investors to institutional investors including pension plans, corporate plans, sovereign wealth funds and endowments and foundations.

For further information, please visit AGF.com.

© 2018 AGF Management Limited. All rights reserved.

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