You can't predict interest rates, but you can plan for them

— -- Q: Where will interest rates be three to five years from now?

A: There are some questions I just can't answer. And this is one of them.

Accurately predicting where interest rates will be one month or one year from now, much less five years from now, is so complex I'd say it's impossible. For anyone.

Not only do you need to forecast what condition the economy will be in, you'll need to predict investor psychology, global money flows and actions by the unpredictable Federal government and the Federal Reserve.

Several well-known bond mutual fund managers have told me trying to predict interest rates is so difficult, it's almost not worth the effort. Instead, a better strategy is to know what you will do with your investments if rates go up or down. It's not your prediction on rates that matters. It's how you adjust your portfolio.

I can certainly understand why you'd want to know where interest rates will be five years in the future. We'd all love to know that. If you knew rates would be higher in the future, for instance, you'd borrow money now, since money would cost more later. And if you knew rates were headed lower, you'd lock in long-term, fixed-income investments such as CDs and bonds now, since they would be worth more in the future.

Unfortunately, though, watching as rates move and adjusting your portfolio as needed is all you can reasonably expect to do.

Matt Krantz is a financial markets reporter at USA TODAY and author of Investing Online for Dummies. He answers a different reader question every weekday in his Ask Matt column at money.usatoday.com. To submit a question, e-mail Matt at mkrantz@usatoday.com. Click here to see previous Ask Matt columns. Follow Matt on Twitter at: twitter.com/mattkrantz