While the Federal Reserve has kept interest rates at record highs during the pandemic, it is only a matter of time before they start to rise as the economy continues to recover and policymakers policies end the current decline in bond purchases. How should investors approach building their portfolios once this happens? In this segment of Backstage Pass, registered on November 10, Fool contributors Rachel Warren, Taylor Carmichael and Connor Allen discuss.
Taylor carmichael: When I talk to Fools about it, most of us just keep doing what we do, we buy stocks, that’s the best place to put your money. I change the stocks I buy a little, I modify them.
For example, a major move that we made, my family, we held Visa for a decade I changed it to SchwabSo Visa is a great stock when people are buying things and the economy is doing well.
Schwab is a great stock for rising interest rates, and I think we’re probably going to see interest rates rise at some point. I love Schwab they have $ 7 trillion under management and you can make a lot of money with Schwab.
This is a change we made, think about your bank stocks, if you have bank stocks, because bank stocks are doing well in a rising interest rate environment, generally, in particular Silvergate Capital or Silicon. SIVB is their ticker, right, you remember Rachel, Silicon Investment?
Rachel Warren: Yeah.
Taylor Carmichael: It’s the bank in California.
Rachel Warren: Silicon Valley Bank.
Taylor Carmichael: Thank you. Silicon Valley Bank. It’s a great bank for raising interest rates because Schwab is great. Schwab is under management of $ 7 trillion. B from A [Bank of America] has like one or two. It would be my number 1 choice if you are worried about rising interest rates. But in general, we strive to keep buying what we like to buy, because those too will change. So that’s a never-ending way of saying keep going, keep going. [laughs]
Rachel Warren: It’s awesome. And you Connor, what do you think?
Connor Allen: Those are great points, Taylor. Another thing about rates and what troubles me right now in the market is that the rates are basically zero and have been zero for so long and everyone knows the rates are going to go up. But it doesn’t look like anyone is taking any cautious steps expecting it to be on the horizon. It seems everyone is just huffing and puffing, thinking rates are going to stay at zero forever.
This is what the market image looks like to me. I do not know. I think maybe a little more caution would be good for the market, knowing that eventually rates will go up. I guess historically they will come. Who knows what the Fed is going to do?
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.