How Rising US Interest Rates Affect Your Investments

How Rising US Interest Rates Affect Your Investments

The Markets in Financial Instruments Directive II (MiFID II) is a regulation that comes into force on 3 January 2018. MiFID II will enhance investor protection and establish a safer, more open and more responsible financial system. With MiFID II the European Union has created a single rulebook covering financial market activities and services. A good way to do this is using a vehicle that has voluntary premium increases”, where you voluntarily increase your premiums to increase the returns on your investment. If you contribute as little as R500 per month with inflation-matching annual premium increases, you could boost your future investment value by as much as 29% after ten years1. Work with a professional financial advisor to ensure that you have a holistic financial plan that targets wealth creation.

What do you need the money for? The answer to this question will help determine whether you want to put your savings into investment products that produce income for you, or that concentrate on growing the value of your investment. For instance, a retirement fund does not need to produce income until you retire, so your investing strategy should focus on growth until you are close to retirement. After you retire, you’ll want to draw income from your investment while keeping your principal intact to the extent possible.

Bank Z is a UK-headquarted bank focused on lending to corporate, SME and retail customers in its domestic market. It utilises some wholesale market funding to complement GBP deposits. While Bank Z will not be immune to short-term disruption, key issues for Bank Z are likely to be longer-term in nature. Primarily it will be concerned with assessing the economic impact of Brexit, for better or worse, on the UK economy, and the effect of associated GBP movements.

At the opposite end of the spectrum, if you invest the same $10,000 in a growth stock, your investment won’t be safe, but the potential return is much greater. In a perfect world, your stock could rise by a factor of ten, rising to $100,000 within one year — or it could go all the way down to zero (most likely, it will do something much less dramatic). Neither outcome can happen with a CD, but that doesn’t necessarily make the CD a better investment, especially in the long run.

 

 

I suspect that most firms are somewhere in the middle of this spectrum. Some of their MiFID II implementation work streams are progressing smoothly and others are a worry. On some days, their compliance officers probably experience no trouble at all and on others thy can hardly see the wood for trees. Sometimes product governance is the big concern, at other times it’s cost disclosure or transaction reporting. Uncertainty and unknowns will remain for some time. I would not be surprised to see some still remaining as we enter 2018. To have any chance of being ready for 3rd January 2018, however, you cannot afford to allow these problems to distract.