Interest rate rises – how will your portfolio be affected in 2024?
Interest rate rises can directly affect company profitability – and in turn, your share portfolio's value. We take a look at how you can respond.
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With the most recent announcement of a rate rise, plenty of Australians are wondering how their portfolios will be affected.
Today, we'll talk through some of the key considerations for advanced investors as we move towards 2024.
Hey there!👋 Since we've partnered with moomoo for this article, we'll be using its products as tools for demonstration throughout. However, it's important to note that all investments have risks – you should always consult with a financial professional prior to making any major financial decisions.
1. Investors will look for opportunities to save
Investors who've been in the game for a while recognise that it's not just about the ability to grow money. It's also about looking for ways to maximise value out of what you already have.
Accordingly, investors are likely to look for ways to make savings with their current investments and future portfolio additions.
One of the most straightforward ways to do this is by saving on brokerage fees. Brokerage fees are ordinarily seen as part of the price of doing business. But this doesn't mean there aren't ways to save.
One example of making savings can be found with moomoo. Launched in Australia in March 2022, it's an investment platform catered to experienced investors who trade regularly.
Currently, investors who sign up to moomoo via Finder will receive an extra 30 days of brokerage-free trading on AU and US stocks.
This is in addition to moomoo's normal introductory offer, where you receive 180 days of brokerage-free trading on AU and US stocks – extending it to a total of 210 days with no brokerage fees. T&Cs apply. Other pass-through fees and FX conversion spreads still apply.
So if you're trading on a regular basis, having more than half a year without brokerage fees can be a significant way to make savings.
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While it's crucial to spend a decent amount of time in the market, opportunities can sometimes be scarce, leaving investors on the sidelines as they wait for the best time to invest. With inflationary pressure and interest rates rising, the cost of having idle cash in your trading account or bank can be extremely high.
moomoo addresses this with its Cash Plus program, which lets you earn passive income from your uninvested cash balance.
💲 Earn interest up to 6.8% p.a. on your uninvested cash for 180 days
With Cash Plus, you can earn interest up to 6.8% p.a.* on your uninvested cash balance for a period of 180 days.
📈 Earnings calculated daily
Cash Plus earnings are calculated daily and paid monthly, with no lock-in period – earnings are available for trading or withdrawal at any time.
🪙 New pricing for AU&US trades
From 1 December onward, moomoo will cut its brokerage, further reducing Aussie investor's costs for trading AU & US stock markets after the free-brokerage period.
- AU trades: AU$3 or 0.03% of transaction value - whichever is greater^
- US trades: US$0.99 per order^
Learn how you can save on brokerage fees with moomoo
2. Greater interest in diversification
Diversification is key for any serious, long-term investor. But when there's a rise in interest rates? Well, potential future earnings tend to look a lot less attractive than today's yields.
So we're likely to see investors looking for ways to broaden their current portfolio. Ventures into previously uncharted territories are likely. The aim – as with any diversification – is to shield against market downturns.
After all, no industry or stock is truly "recession-proof" – but it is true that some tend to see less downturn than others. Healthcare, Fast-Moving Consumer Goods (FMCG) staples and cash are just a few that tend to see consistent growth, even in the face of interest rate rises.
So if you're thinking about diversifying your portfolio further, features like moomoo's investment themes and Institutional Tracker can be extremely useful.
Investment themes reflect the latest trendy investment themes in town (AI being a recent example) and the overall performance of each theme. The Institutional Tracker lets you see what the world's biggest organisations are trading, helping investors find where the 'big money' moves are to get inspiration for their own trading.
In short, features like this are able to provide insights into what's being actively traded, stocks and securities of interest or industries that are on the rise.
Of course, diversification can be about more than the type of industries you invest in. It's the markets you choose as well – which leads us to our next point…
Learn more about diversifying your portfolio with moomoo
3. Exploring potentially higher returns in new markets
Sometimes, Australian investors can be a bit insular when it comes to markets. The ASX is familiar territory, and there's a sense of loyalty when it comes to "buying local".
But given the interest rate rises, we can expect to see more Australian investors looking beyond the ASX for other opportunities.
Generating regular income via overseas markets is likely to be leveraged as a way to offset the interest rate rises at home.
Access to more overseas markets – through platforms like moomoo – also means access to extended trading hours. With round-the-clock trading hours, Aussie investors can gain access to the overnight session, traditionally only available for certain brokers, hedge funds and other financial institutions.
It can also provide access to generation-changing companies – such as those involved in industries like AI, semiconductors, and electric vehicles.
The AI market is projected to surge 900% to $300 billion by 2026. Meanwhile, China is dominating EV growth with car sales expected to rise from 24% to 45% of total sales by 2025^^. These are just a couple of examples of the opportunities available abroad.
Explore new markets with moomoo
4. Greater investment in investor education
It's a cliche, but the best investment you can make really is in yourself. Accordingly, investor education is a lifelong process.
Investor education is set to be critical in the new year, as new and experienced investors alike look for ways to maximise their investments, save cash and move deeper into the inner workings of the market.
Now, one of the great benefits of the internet is that access to real-time information has become far more freely available. Pundits can provide up-to-date news, courses can be regularly updated and investing truisms can be easily tested against real-world results.
With that said, you still need to vet your sources carefully. Not all investing information is created equal.
One place to continue your investor education is with the resources provided by investor platforms.
moomoo's Australian arm offers the Premium Learn program, which is geared at upskilling experienced investors. It offers more than 1,000 courses, tutorials and video webinars, with the library regularly updated. T&Cs apply.
moomoo offers a paper trading tool. This allows investors to use virtual funds to practice trading without risk, while still pairing their learnings with real-time data and advanced analysis tools. This can help investors to fine-tune their investing skills and gain confidence, before using real funds.
Additionally, you're able to follow existing study plans or customise a plan to focus on a particular topic – for example, diversified strategies.
Enhance your investor education with moomoo
5. Closer scrutiny of earning reports
Interest rates can have a direct effect on company overheads – which in turn can impact their profitability, and ultimately their share pricing.
So given the rise in interest rates, we're going to see investors scrutinising earning reports in much greater detail.
We've spoken elsewhere in more detail about earning reports and earning seasons. But suffice to say, sorting through these types of reports manually can be quite complex.
If you're looking to delve deeper into the world of earning reports, it's worth looking for a trading platform that streamlines the process for you.
moomoo is one trading platform that offers this feature, via its earnings calendar. You're able to customise it to add reminders for specific companies and access Visualised Financials Data.
Explore earning reports with moomoo
