GOLDEN RULES FOR INVESTING WHEN INTEREST RATES ARE LOW

GOLDEN RULES FOR INVESTING WHEN INTEREST RATES ARE LOW

■ 1. Paying off debt may be your best investment, and low interest rates help you pay off loans faster.

■ 2. Know your tolerance to risk. “If you’re moving out of bank deposits you are taking on more risk,” 

■ 3. Don’t keep all your eggs in one basket. Spread your money across different types of assets to reduce your overall risk.

■ 4. Squeeze every possible dollar out of bank deposits. This means shopping around and switching banks when you need to.

■ 5. Stay flexible with savings. “Don’t lock anything in for more than 12 months because interest rates are going to go up at some stage,”.

■ 6. Negative gearing is a popular tool but it means you are losing money — always aim to own investments that pay you more than they cost you.

■ 7. Make sure income paid by your investments is sustainable. Before the Global Financial Crisis property trusts borrowed money to pay income to their investors, and their shares eventually got savaged.

■ 8. Understand what you are investing in and seek professional advice. “People get bamboozled by financial engineering. Like Warren Buffett said, beware of geeks bearing formulas”.

■ 9. Beware of the risks if borrowing to invest. “While borrowing money for investment purposes can magnify gains on a rising market, it could also magnify losses in a declining market.” 

■ 10. Today’s low interest rates are coupled with low inflation, so you don’t need to take massive gambles to keep up with rising living costs.