Federal Reserve Chairman, Ben Bernanke, recently made a statement that the interest rates would be low till 2013. Though it might be good news for some people, Investors find it as a distressing blow.
Many investors like to purchase bonds, and so the older they get, the more bonds they have. It is one of the many common portfolio managements, and many people . A number of people purchase CDs and treasury bonds at local banks.
Let’s say you retired about 5 years ago, and all your retirement savings are into CDs at a bank. In those days, CDs got more than 5% interest. But what will happen if your annuity or Treasury bond is maturing this year? You wouldn’t be enticed by zero interest rates.
The zero interest rate Federal policy has both winners and losers, and the effect of this news depends upon which side of coin you fall on. While investment banks and other large financial organizations are winners, the investors are the losers.
So while large banks can borrow big sums of money at almost no cost, and therefore lend at great rates, those who are investing in bonds are not getting a great deal. So in the end it is currently better to invest in Real Estate.