Why Lock in Longer-Term Rates?

lock in longer-term rates

It’s good to be a saver right now. For the first time in years, investors are being paid a competitive rate to hold cash and other short term fixed rate investments. Many investors are starting to question why they should lock in longer-term rates at all with short term rates being higher. There are several reasons you may consider to lock in a lower yield on longer dated CDs, bonds and fixed income funds.


  • Stability and predictability: By locking in a longer-term rate, investors can have a clearer understanding of their future cash flows and interest earnings.


  • Preservation against rate decreases: If an investor believes that interest rates may decline in the future, locking in a longer-term rate can shield them from potential rate cuts.


  • Potential hedge against inflation: Longer term rates are still higher than inflation has historically been. Inflation can erode the purchasing power of money over time. By locking in a longer-term rate, investors can help preserve their capital against the negative impact of inflation on their returns, as the interest rate remains fixed over the entire term.


  • Pursuing long-term financial goals: Some investors may have specific long-term financial goals, such as funding retirement, education expenses, or major purchases. Locking in longer-term rates can align better with such objectives, providing a steady and predictable income stream to support these goals.


  • Diversification: A well-balanced investment portfolio includes a mix of short-term and long-term investments. By incorporating longer-term rates, investors can diversify their portfolio and spread risk across various maturities.


Ultimately, the decision to lock in longer-term rates should align with an investor’s specific financial goals, risk tolerance, and liquidity needs. Reach out if you need help figuring out where different fixed income investments fit into your own investment plan.


The opinions voiced in this article are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision.


All investing involves risk including loss of principal. No strategy assures success or protects against loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk. CDs are FDIC insured to specific limits and offer a fixed rate of return if held to maturity, whereas investing in securities is subject to market risk including loss of principal.​ Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price.


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