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4 Simple Actions to Consider After Fed Liftoff

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We finally have liftoff. After months of anticipation, the Federal Reserve (Fed) initiated its first rate hike in nearly a decade , raising the Fed Funds Rate by 25 basis points ( bps ). Why not a bigger blast off? The Fed has made it clear that rate "normalization" will happen gradually , meaning rates will likely remain below historical averages for the foreseeable future. But while it may take years to get back to a 4 to 5 percent Fed Funds rate, higher rates are on their way. The good news for investors is that just a few simple actions can help you prepare your bond and equity portfolios for this new rising rate environment . In the wake of the Fed's decision, here are four such moves you may want to consider.

1. Consider Your Duration

shortening the duration of your bond portfolio duration greater price volatility and the potential for losses when rates rise

2. Focus on Credit

credit risk interest rate risk credit risk

3. Shift to Cyclical Sectors

traditionally defensive sectors cyclical sectors get cyclical exposure through two sectors net interest margins

4. Seek New Sources of Income

many of these companies will likely come under pressure when rates rise may be an attractive way to maintain yield in a rising rate environment prepare your portfolio now for a rising rate environment iShares.com/iThinking FLOT NEAR CSJ IYW IYG DGRO Heidi Richardson is a Global Investment Strategist at BlackRock. She is also Head of Investment Strategy for U.S. iShares.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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