Shares can be one of the most rewarding areas for investors to focus on when interest rates are low. Shares can deliver benefit here as lower interest rates can effectively increase the value of future company cash flows. As interest payments are a major cost for businesses, lower rates mean increased profits for businesses and contribute to rising share prices.
It also means that leveraging investments is less expensive, so there is potential to see positive returns on your investments here. Shares can also provide an ongoing source of income through dividends, and investors could potentially offset the loss of income from interest with dividends from high-yielding stocks. However, there is, of course, no guarantee how well a company is going to perform or whether they will be able to maintain their dividends in the future, especially in economically uncertain times.
Exchange traded funds (ETFs) are another good option because they offer a simple and cost-effective way to invest in specific markets, industries or commodities. ETFs can take a lot of the guesswork out of investing as they track indexes, rather than individual companies. When you purchase an ETF you are essentially getting access to a diverse portfolio in one move. They are generally a lower risk option than buying individual shares, but investors should also be aware that the potential returns won’t be as high as those from purchasing stocks.
Another option is to invest metal commodities like gold and silver or the financial instruments dedicated to them, such as futures contracts or contracts for difference. When interest rates fall, it almost always signals that the economy is underperforming. Historically, this has always been a positive for precious metals. Gold and silver are usually seen as a stable investment, so people often turn to these as a way to protect their wealth during uncertain times. As a result, precious metal prices, particularly gold tend to go up as interest rates fall.