Interest rates play a big role in your finances. It affects everything from savings and money market rates, bond yields, mortgage rates, credit card rates, and even how you value a company and it’s stock price.
How market interest rates are set and the factors involved all play a role in what you earn on investments and pay on loans. It starts with monetary policy and the Federal Reserve.
Who Sets Interest Rates
The Fed uses monetary policy to manage the economy. When you here about the Fed printing money, it’s trying to increase the money supply to lower interest rates and increase lending, spending, and inflation.
To do the opposite, the Fed changes the federal funds rate. The federal funds rate is the rate banks charge other banks to borrow money. So a higher federal funds rate will lower the money supply and decrease lending, spending, and inflation. Continue Reading…
Often times you’ll here a company announce a stock split. If you invest in stocks long enough, you’ll eventually experience it yourself.
If you’ve ever heard “don’t put all your eggs in one basket”, it’s used to describe a simple investing principle known as diversification.