• Skip to main content
  • Skip to footer
MENUMENU
  • Home
  • About Us
    • Our Philosophy
    • Choosing a Financial Planner
    • Legal and Regulatory
    • Team
    • Careers
    • Contact Us
  • Our Services
    • Financial Planning
    • Ongoing Financial Guidance
    • Portfolio Management
  • Financial Planning Basics
    • Continuing Care Retirement Communities (CCRCs)
    • Retirement Planning and Cash Flow
    • Social Security
    • Taxes
    • Insurance & Risk Management
    • Investments
    • 401(k)
    • Real Estate
    • College
    • Liquidity
    • Divorce
    • Estate Planning
    • Sensible Updates
  • Resources
    • The Types of People We Help
    • Webinars
    • Blog
    • Videos
    • Financial Planning Guidebook
    • Continuing Care Retirement Communities Guidebook
    • Primers
    • Financial Planning Links
    • Client Links
    • Financial Planning for Older Adults
  • Contact Us
Sensible Financial Planning

Sensible Financial Planning

Follow Us

  • Facebook
  • LinkedIn
  • Twitter
  • YouTube
Client Links

Call Us Today
781-642-0890

What do the recent changes in interest rates mean for your portfolio?

by
Rick Miller
Ph.D., CFP® - Founder

July 23, 2013

Interest rates have risen in the last month or so, and bond prices have fallen. My recent blog posting provides a summary about what these changes mean for your portfolio, your full balance sheet, and your financial situation.

Very briefly, you accumulate assets during your earning years to fund spending for college, retirement, and other purposes. You can think of this future spending as a series of liabilities. The present value of these liabilities is the amount of money you would need today to fund your future spending.

As interest rates rise, the present value of your future spending declines in the same way that bond prices do.

However, in many cases, you plan to do your future spending after the bonds in your portfolio mature. For example, for a 50 year old, much retirement spending will occur 15 or more years into the future. Most bond funds have a duration (something like an average maturity) of substantially less than 15 years.

Liabilities with longer durations will decline more. Bond funds with shorter durations will decline less. In many cases, taking both your portfolio and the present value of your liabilities into account, rising interest rates will actually improve your overall financial situation, even though the bond funds in your portfolio may decline.

It is true that if you knew the future path of interest rates, you could theoretically time selling and buying bonds to make yourself even better off. However, as with market timing more generally, the emphasis is on theoretically.

If you have concerns about the bonds in your portfolio, please contact us so that we can address them.

More articles by Rick Miller Filed Under: Investments Tagged With: Federal Reserve

Footer

Services

  • Financial Planning
  • Financial Guidance
  • Portfolio Management

About Us

  • Our Philosophy
  • Team

Resources

  • Blog
    • The Types of People We Help
  • Financial Planning Guidebook
Sign up for our Newsletter

Follow Us

  • Facebook
  • LinkedIn
  • Twitter
  • YouTube

Locations

Massachusetts

203 Crescent Street, Suite 404

Waltham, MA 02453

Phone: (781) 642-0890
Fax: (781) 810-4830

 

California

600 B Street, Suite 300

San Diego, CA 92101

Phone: (619) 573-4131​

Disclaimer

This content reflects the opinions of Sensible Financial®. We may change it at any time without notice. We provide this content for informational purposes only. Although we endeavor to keep the information up-to-date and correct, we make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability for a particular purpose or availability with respect to the website or the information, products, services, or related graphics contained on the website for any purpose. We do not intend the information contained in this website as investment advice and we do not recommend that you buy or sell any security. We do not guarantee that our statements, opinions or forecasts will prove to be correct. Past performance does not guarantee future results. You cannot invest directly in any index. If you attempt to mimic the performance of an index, you will incur fees and expenses which will reduce returns. All investing involves risk. You can lose any money you invest. There is no guarantee that any investment plan or strategy will succeed.

More important additional information and full disclaimer.

Copyright © 2025 Sensible Financial · All Rights Are Reserved
Legal Disclosure