Smart takes on rising interest rates from smart people
For today’s post, I thought I’d highlight what some smart people have been saying about rising interest rates over the last couple of weeks.
From Tom Bradley, President, Steadyhand Investment Funds:
“Rising interest rates are a healthy sign because previously rates had been unsustainably low.” “The fact that stocks, bonds and gold all went down tells me that some speculators are getting shaken out, which is a good thing for long-term, valuation-driven investors. Capital markets are in need of a better balance. The sooner they get there and complacency abates, the better off investors will be. If it means some short-term bumps along the way, it’s worth it.”
From Derek Foster, Author, The Idiot Millionaire:
“First off, I have no clue what is going to happen as I am not an economist and won’t pretend to be one here – but if interest rates continue to rise, this will hurt stock prices in the short-term.”
“History is littered with investors who have tried to dance in and out of the stock market – and most have failed miserably (myself included)! But who cares as long as the dividends keep coming.” “The dividends keep growing and many companies are buying back a lot of shares. As the markets have fallen because of the prospects of increasing interest rates, the Loonie has also fallen, making US stock dividends increase in Canadian dollar terms because they are more valuable when converted back to Canadian dollars.” “So what’s not to like? As stocks get cheaper, the companies can keep buying back their shares at cheaper prices, opportunities might arise for investors to find some cheap stocks to invest it, and US dividend income increases in Canadian dollar terms offering a “pay raise” to some investors.”
From Dividend Growth Investor:
“Stocks have finally began sliding down, and I am starting to get excited. I would love for stocks to get down even further from here. As someone in the accumulation stage of the dividend machine building process, I welcome any price weaknesses with open arms…the amateurs are starting to get nervous however. They need positive reassurance through rising prices. If they don’t get rising prices, they get scared, and start selling everything.”
“At the end of the day, smart dividend investors view stocks as partial ownership shares of real businesses. They do their research in uncovering those businesses, and then try to buy existing owners out at bargain prices. They can then sit back, monitor their business interests, and collect dividends one check at a time. After all, if you owned an apartment building next to a college that is always occupied, you won’t give a damn if its quoted valued fell by 5% – 10%- 20% in one single day. As long as you can rent your building out, you should do just fine by ignoring “quoted values”.”
I found these takes interesting since by and large, they are all saying the same thing: don’t worry about the short-term volatility and stick to your plan. You and I should do just that.
What’s your plan or advice for rising interest rates?