Floater

Next time, flush twice.

A floater is a security whose interest rate changes along with the short-term market. A floater often refers to bonds and variable coupon rates.

Floaters go with the flow of benchmark rates like LIBOR, EURIBOR, and the U.S. Treasury rates (some of the biggies). Having a floater when the market is doing well is likely more beneficial than having a fixed-rate note in the same economic climate. Yet having a fixed-rate note is preferable when the markets are tumbling downhill.

Fixed-rate notes are more stable and less risky since they’re...well, stable, while floaters depend on the state of the current economy. For investors who want to hedge their bets and reduce risk, there are also inverse floaters, which are inversely tied to benchmark interest rates.