The economy is always changing. Interest rates rise and fall, and peoples’ financial situations change along with them. While periods of inflation make it more difficult to borrow money, it is possible to prosper by making the right decisions at the right times.
You can take advantage of high interest rates in a few ways. By managing your money carefully, utilizing high-yield savings accounts, and selling off unnecessary assets, you can financially benefit during these periods. Depending on your investment objectives and financial position, investing in certain sectors may be more beneficial than others. Reach out to your financial advisor should you want to explore your options further.
Speaking with a financial advisor is always an excellent way to help you make the right decision for your situation. To speak with a dedicated and helpful professional today, contact Qopia Financial to make the right decision for your finances.
Utilize Your Savings
During periods of high interest, people with savings benefit. By ensuring your money is allocated properly into savings accounts with high interest rates, you increase your passive income. While they aren’t the most beneficial long-term choice, they’re a safe bet to wait out periods of high interest while still increasing your money.
Due to the nature of the market, high interest rates make it more difficult to borrow money or pay off active debts. Simply put, it costs more money to borrow money. This, however, makes it more beneficial for those with money specifically set aside in savings. This money is significantly less affected by inflation, making it less risky to have money in a high-yield savings account.
Invest in Cash-Rich Companies
Companies that have higher amounts of cash reserves have less risk of being affected by high interest rates. This is due to a simple fact: by having larger cash reserves, they’re less likely to have to borrow. This means they carry significantly less risk of bankruptcy or defaulting on a loan.
Instead of having to drain their resources or borrow cash to keep up with the market, they can continue to spend capital on new projects, hiring, and continue to profit. While other companies cut back on spending to avoid losing money and stock prices, cash-rich companies keep themselves afloat and can utilize their reserves to avoid borrowing during periods of high interest.
To determine a company’s cash reserves, begin by checking its quarterly reports and balance sheets and look for a low debt-to-equity (D/E) ratio. This is the ratio that compares the company’s liabilities against its shareholders’ equity. A low ratio means that a company relies less on debt financing and borrowing money.
While debt-based financing can allow the potential for a company to fund new projects, hire new staff, and expand, it can also backfire. If the company spends more of the cash from debt financing than it generates during the same period, it can start losing money. Therefore, a company with a low debt-to-equity ratio is a safe bet.
How to Calculate Debt-to-Equity
You can calculate a company’s D/E with the information on its balance sheet.
- Debt: the company’s debt includes any short or long-term borrowings and any debt-like items.
- Shareholder equity: determined by the equity raised, contributed by the owners, and any other retained or saved earnings.
By dividing the debt by the shareholders’ equity, you can determine how a company raises their capital to keep itself afloat.
It’s important to remember that each industry is different. To determine how a company is performing or generating revenue relative to their individual industry, perform this same D/E equation using their available information.
Invest in the Financial Sector
Banks and brokers generate a great deal of money from interest, so it stands to reason that during periods of high interest, they do well. The same goes for insurance companies and money management companies. When credit is more difficult to acquire for the everyday person, people pay more money to borrow money.
Banks tend to have an increase in their profit margins as they generate more revenue from customer loans, mortgages, credit cards, and all other forms of paid debts due to the higher interest rates.
Talk to a Financial Advisor
The most practical thing you can do when making a decision is to speak with a financial advisor, like the team here at Qopia Financial.
A financial advisor can help you navigate the financial markets and help you make the proper decisions for your money. Get in touch with one of our team members or check our resources to make the right choice for your financial situation today.
Qopia Investments is a trade name of Aligned Capital Partners Inc. (ACPI). ACPI is regulated by the Investment Industry Regulatory Organization of Canada (www.iiroc.ca) and a Member of the Canadian Investor Protection Fund (www.cipf.ca). Qopia Investments is registered to advise in securities and mutual Funds to clients residing in Alberta, Ontario, Saskatchewan, and British Columbia. This publication is for informational purposes only and shall not be construed to constitute any form of investment advice. The views expressed are those of the author and may not necessarily be those of ACPI. Opinions expressed are as of the date of this publication and are subject to change without notice and information has been compiled from sources believed to be reliable. This publication has been prepared for general circulation and without regard to the individual financial circumstances and objectives of persons who receive it. You should not act or rely on the information without seeking the advice of the appropriate professional.
Investment products are provided by ACPI and include, but are not limited to, mutual funds, stocks, and bonds. Non-securities related business includes, without limitation, fee-based financial planning services; estate and tax planning; tax return preparation services; advising in or selling any type of insurance product; any type of mortgage service. Accordingly, ACPI is not providing and does not supervise any of the above noted activities and you should not rely on ACPI for any review of any non-securities services provided by
Investment products are provided by ACPI and include, but are not limited to, mutual funds, stocks, and bonds. Non-securities related business includes, without limitation, fee-based financial planning services; estate and tax planning; tax return preparation services; advising in or selling any type of insurance product; any type of mortgage service. Accordingly, ACPI is not providing and does not supervise any of the above noted activities and you should not rely on ACPI for any review of any non-securities services provided by Qopia Financial.
Any investment products and services referred to herein are only available to investors in certain jurisdictions where they may be legally offered and to certain investors who are qualified according to the laws of the applicable jurisdiction. The information contained does not constitute an offer or solicitation to buy or sell any product or service. Past performance is not indicative of future performance, future returns are not guaranteed, and a loss of principal may occur. Content may not be reproduced or copied by any means without the prior consent of the author and ACPI.Disclosure of commissions in mutual funds in accordance with NI 81-102 (15):“Commissions, trailing commissions, management fees and expenses all may be associated with mutualfund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, theirvalues change frequently, and past performance may not be repeated”.
Financial Planner of Qopia Financial / Portfolio Manager of Aligned Capital Partners Inc.
I grew up in a small town south of Ottawa, called Metcalfe, ON and graduated from the University of Ottawa in 2012. My love for sports is a major reason why I place so much importance on performance and this includes performing for clients. Those closest to me would describe me as straightforward, but also generous, driven, and dynamic. As a coach, teammate, and partner of my clients, I want to see that everyone wins.
Since 2017, I have been working as a Financial Advisor and have always had a natural affinity for business and investments. In early 2021, I completed my Chartered Investment Management (CIM) ®designation, which has helped me select and recommend the highest quality investments for my clients. My goal is to provide the most competitive, transparent, and cost-effective Estate Planning and Investment Management service in Canada, which focuses on Tax minimization, Growth and Protection.
I don’t do it alone. At Qopia, I have a team of dedicated administrative staff, in-house analysts, insurance specialists, lawyers, accountants as well other Financial Advisors with whom I can consult. I pride myself on striving to deliver the industry’s top service for my clients.