Inflation and interest rates are big words in finance, but they really just mean how much prices are rising and how expensive it is to borrow money. Right now, both are high, which is changing how people invest. Let’s break it down so it’s easy to understand.

How High Interest Rates Change Investments

When interest rates go up, borrowing money gets more expensive. This slows down the economy and affects different investments in different ways:

• Stocks (Shares in Companies): When borrowing is expensive, businesses may slow down, which can make stock prices drop. Investors now prefer companies that already make good money instead of those that promise big earnings in the future.
• Bonds (Loans to the Government or Companies): When interest rates rise, older bonds become less valuable because new bonds pay more. But if you buy new bonds, you can get better returns.
• Real Estate (Houses & Buildings): Since mortgage rates go up, fewer people can afford to buy homes, so real estate prices may slow down. Investors now focus more on properties that bring in rental income.
• Cash & Savings: The good news is that savings accounts and CDs (certificates of deposit) now pay more interest, making them a safer way to grow money.

How Inflation Affects Your MoneyInflation means that prices are going up, making your money worth less over time. To fight this, investors need smart strategies:

• Invest in Things That Keep Value: Gold, real estate, and stocks that pay dividends (extra money to investors) often do well during inflation.
• Spread Your Money Around: Don’t put all your money in one type of investment. A mix of stocks, bonds, and real estate can help protect against losses.
• Choose Investments That Pay You: Things like rental properties, dividend stocks, and bonds that adjust for inflation can give you money while you wait for the economy to settle.
• Think About Debt: If you have loans, locking in a fixed-rate loan now can save you money before rates go up again.

What Should You Do Now?The economy is changing, and smart investors are paying attention. The best thing you can do is check where your money is invested, learn about economic trends, and talk to a financial expert.At Fiat Wealth Management, we make investing easy to understand and help you make smart choices. Want to know how to grow your money in today’s economy? Let’s talk!