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Investors look at shorter terms for higher rates

23/05/2011

Investors need to consider a range of investments to diversify portfolios and maximise opportunities as interest rates rise.

The Reserve Bank of Australia made it clear in its May board minutes released this week that a rate rise will come sooner rather than later.

Economists are tipping a hike from 4.75 per cent to 5 per cent within three months, most likely in August, and possibly more rises after that.

Brad Newcombe, research director with fixed-income broking house FIIG, says a big advantage of fixed-income investments when rates are rising is that you get exposure to rising rates.

Rates on shorter dated term deposits may rise with official interest rates, but probably not by as much.

However, investors can keep their opportunities open with shorter dated term deposits and keep rolling them over.

Source: The Australian



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