Understanding Interest-Rate Risk

2 min read

Brought to you by Sound Choices - AGF Education for Investors and Advisors

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).

 

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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 “Finding Income Alternatives” at AGF.com.


 

Commissions, trailing commissions, management fees and expenses all may be associated with investment fund investments. Please read the prospectus before investing. Investment funds are not guaranteed, their values change frequently and past performance may not be repeated.

The commentaries contained herein are provided as a general source of information and should not be considered personal investment or tax advice. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change investment decisions arising from the use or reliance on the information contained here.

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.

AGF Investments is a group of wholly owned subsidiaries of AGF and includes AGF Investments Inc., AGF Investments America Inc., AGF Investments LLC, and AGF International Advisors Company Limited. The term AGF Investments may refer to one or more of the direct or indirect subsidiaries of AGF or to all of them jointly. This term is used for convenience and does not precisely describe any of the separate companies, each of which manages its own affairs.

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RO 2259164 
July 15, 2022
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