Negative interest rates have had the Canada stock market scrambling recently. Investors scrambled to get rid of their unwanted shares of choice were few and far between. This meant that some investors were left with nothing but a loss and no gain for their portfolios. What does this all mean for Canadians?
When negative interest rates hit the United States stock markets investors were unsure of how long they would be in the dark. The worst was to think about how long it might be until rates began to move higher again. What does this mean for Canadians?
If you are an investor waiting for negative interest rates in Canada, you are probably one that is banking on a little bit of time to make up for it. However, that may not be possible. Recent numbers have shown that the lowest rates in over two years could still be on the way. With that being said, the chances do exist that rates will remain at current levels for quite some time.
What does this mean for investors? Canadian stocks are a great way to increase your portfolio’s value while protecting it at the same time. The risk associated with holding Canadian stocks is much lower than what it would be for holding the American stocks. This is due to a number of reasons. First, there is less risk in Canada as it is a country surrounded by countries that are quite similar to the United States. That is not to say that the Canadian economy will not have bumps and bounds, just that it will be much different than the US economy.
It is also important to point out that Canadians enjoy a better stock market performance than Americans do. One Canadian company has the 10th highest stock market return among all countries. It is not hard to see why people are flocking to invest in Canadian stocks. Also, Canadians enjoy having a low debt to earnings ratio, unlike the US which has an astounding level of debt. Finally, Canadians enjoy having a stable interest rate, something that has not been the case for a long time.
What does negative interest rates mean to Canadians? As it turns out, negative interest rates are not going to have a significant effect on the Canadian economy, at least not right away. However, if rates go up too much, Canadians may find themselves in some serious financial trouble. Right now, there are some fears about an interest rate hike, but until they hit rock bottom, no one really knows.
What can you do to protect yourself from negative interest rates? Perhaps you should learn a little bit about diversifying your assets. By spreading your risk over a wider array of investments, you reduce the chance of any one investment failing. Additionally, diversification helps minimize loss in case one particular investment fails. Finally, diversification allows you to get the most out of any tax breaks that may be offered because of the positive effect it has on your taxes.
So, what negative interest rates mean to Canadians? It is important that you consider how things could play out if interest rates were to go even lower. For now, it is best to play it safe and take advantage of diversification. The best way to do this is to focus on making sure that you are investing your money in places that offer significant potential for growth. If you have done that, you will be able to ride out any waves as the rates go down further.
What can you do if negative interest rates come into play for you? One option that you could consider is taking advantage of the index funds market. Index funds are excellent vehicles for building long term wealth. The returns are not as strong as they would be with more actively managed mutual funds but you will not have to worry about losing all of your money at once. If things do turn south for the Canadian dollar, you will still have your cash.
Another way to protect yourself from negative interest rates is to start investing in things that offer flexibility. If you own stock in a company, for example, you could consider selling some of your shares if the market starts to experience a downfall. This will allow you to keep more money in the bank and potentially allow you to gain more in the future. If you are unsure whether or not the market will perform in your favour, there are other options available. Negative amortization mortgages are ideal for Canadians looking to safeguard their wealth.
Finally, one of the last ways that what negative interest rates means to Canadians can be discussed. If you are in the business of lending money, the value of your investment may change. If the prime rate drops suddenly, you could lose money. This is why it is so important for people who lend money to make sure that their calculations are accurate and up to date. There are a variety of tools available to help you ensure that you are able to protect what you invest in the best possible manner.
