Despite rekindled fears over rising interest rates, higher yields are a positive development for long-term investors.
Financial pundits are busy offering promises of how next Tuesday’s Presidential election will impact markets. The truth is, no one knows exactly how the result will affect portfolios. Fortunately, long-term investors shouldn’t be too worried.
Anyone who’s purchased a car knows the party most prepared to walk away from the deal has the advantage. It is the motivated buyer, or seller, who is most often forced to make the biggest concession. It’s no different in investing.
In 1981, David Booth co-founded Dimensional Fund Advisers as a way to apply academia’s innovative theories so investors could profit in the real world. Today, Dimensional manages over $400 billion for investors around the globe.
Do negative interest rates abroad penalize U.S. investors who hold international bonds? Not necessarily. Investors who hedge currency exposure enjoy a smoother ride while also counterbalancing the effects from negative foreign bond yields.
No one knows exactly how “Brexit” will ultimately impact the U.K., Europe and rest of the world. During times like this, it is important to maintain perspective.