In 2017 , Granite Group wrote several pieces on the effect of higher interest rates on bonds. Investors have just witnessed the third interest rate hike in 2018, Granite Group continues to encourage investors who hold bond mutual funds or bond ETF’s to be cautious. We do not expect the same percentage back up in rates going forward, but do believe rates will go slightly higher over the next 12 months.
What to does this mean for you?
Bond funds have lost money since September 2017. In the fixed income (bond) allocation model, Granite Group increased the allocation to money markets last year and this year. To keep an investor’s allocation consistent to bonds, there are other low correlated bond-like instruments in the fund line up that that would be better when interest rates go up, one example would be the money market. We strongly encourage you to speak with your financial advisor for advice or call Granite Group to explain all the options in the plan.
As rates increase into 2019, we encourage investors desiring fixed income (bond) exposure to dip their toe in the water when the 10 year treasury yield goes higher next year.
Please feel free call Granite Group with any questions. (203) 210-7814