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How to Invest for Rising Interest Rates

 

By 

J.B. MAVERICK

 

Updated January 14, 2022

Reviewed by 

AKHILESH GANTI

Fact checked by 

PETE RATHBURN

Many investors know that interest rates have a big impact on their debt. After all, when interest rates rise, the cost of borrowing goes up. But did you know that rates can also affect your investments? Although many investors and analysts focus on interest rates being low, rising interest rates change the landscape of the marketplace for businesses and individual investors. Here's how investors can profit from rising interest rates.

Invest in Technology, Health Care 

Dividend-paying companies are favored by many investors because they share a portion of their earnings with shareholders. But if you're looking for a form of long-term growth with interest rates in mind, you may want to look elsewhere.

 

Companies in the technology and health care sectors tend to hold on to greater amounts of profits as retained earnings to reinvest in growth opportunities, rather than paying them out in the form of dividends. Past performance shows that during periods of rising interest rates, the health care and technology sectors experienced average gains that outperformed the S&P 500 Index.