So, what do people do? They go hunting for higher yields. One of the easier things to do is to go to the banks and invest in products which promise yields which are much higher than the said interest rates. Many also go to the stock market to look for stocks, bonds or preference shares which offer yields that beat inflation.
In the hunt for higher yields, we might want to keep this in mind:
When we are offered a high yielding investment, we should ask how the investment is delivering the promised yield and if it is sustainable. If sustainable, for how long is it sustainable? What is the likelihood of a capital loss at various entry prices?
Depending on what our existing investments are, some will suffer more than others but chances of any investor escaping unscathed would be slim. So, now, do we liquidate all our investments and do a Chicken Little which is what some people have done?
Well, we could but knowing that I don't really know, my preferred method has always been to stay invested while maintaining a high level of liquidity. So, doing what I do means being able to continue receiving income from my investments which increases the level of liquidity that I have.
After all, what is the best way to ride out volatility? Having plenty of cash.
So, bonds or REITs, before we plonk in any money now, we might want to temper our expectations by reminding ourselves of the risk that comes with the instant gratification of yield.