Low Interest Rates and Investor Risk Tolerance
In the current environment of ultra-low interest rates, which are often negative real rates after accounting for the impact of inflation, income-seeking investors are often faced with a decision regarding whether to accept increased volatility and risk in order to pursue higher yields. These yields can come from real estate investment trusts (REITs), dividend-paying stocks, “junk” bonds, and many other types of assets. As this article notes, “investors with low-interest fatigue have been searching for short-term alternatives, and many are turning to riskier choices in their quest for higher returns.” Adding higher-yielding assets to a portfolio may be an appropriate decision for some investors, but this adjustment needs to be made within the context of appropriate risk tolerance parameters based on individual circumstances.
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- Anthony Winkels is Managing Partner and Wealth Advisor at Fortis Wealth Management
