If interest rates decrease, what would you do if you mainly held cash and common stocks in your portfolio?

Question

This is in terms of investing. EG would I purchase bonds, etc.

Answer 1

To follow up on Mark's comment, I would reduce my cash position and increase my stock position.  When interest rates fall, this is the best time to be fully invested (put cash into the market).  As interest rates fall, "risk free" investments such as cash savings and bonds become less attractive (offer a lower return).  So investors move back into the market to make more money.  The inflow of cash into stocks pushes up the market.

Answer 2

i dont get that

Answer 3

General rule of thumb is that as interest rates decline, people move into equity (stocks).  So, stocks should rise.    

However, I recommend finding a portfolio that meets your age,  and need for liquidity.     Moving in and out with the market is one sure way of losing all your money unless you have the time and talent to invest wisely.