Interest rates play a crucial role in shaping investment returns. When rates rise, borrowing becomes more expensive, which can slow down economic growth and negatively impact stocks, especially in sectors like real estate and technology. On the other hand, higher rates can benefit fixed-income investments like bonds and savings accounts, as they offer better returns.

When interest rates fall, borrowing becomes cheaper, leading to business expansion and stock market growth. However, lower rates mean lower returns on bonds and savings. Smart investors monitor interest rate trends to adjust their portfolios, balancing risk and return for long-term success.