Dan Fuss, vice chairman of Loomis Sayles & Co., said Tuesday that he thinks the U.S. is in "the foothills" of a rising interest-rate environment in which one needs to focus on individual security selection.

Fuss gave his views to approximately 300 attendees at the second-day opening session of the 3rd Annual Financial Advisor Symposium, produced by Financial Advisor magazine, in Weston, Fla.

But the U.S. central bank is not likely to start tightening until unemployment falls below 7% and it's apparent the decline is sustainable, says Fuss, who believes it could be another year or 18 months before we start seeing these major changes.

"If that is the case, how do you deal with it? You substitute specific risk for market risk," said Fuss, who has been an investment manager for 57 years and was Morningstar's 2009 fixed-income manager of the year.

However, one specific risk investors should avoid when interest rates rise is national government financing, Fuss said. "That's going to flatten and will provide the lowest return. It obviously shifts you in the U.S. to corporate securities. Stocks happen to be corporate securities. Bonds happen to be corporate securities."

In a growing market, stocks of corporations that are market-share dominant tend to do well, Fuss said, and certain corporate bonds do well.

"But it is a credit negative. We don't want forget this," Fuss stressed. "You don't run out and buy low-rate bonds just because they have more yield, because a lot of them won't survive in this environment. And that is very reminiscent of the '70s."

One attendee asked Fuss what would happen if he is wrong and interest rates don't go up.

"I've been wrong a lot!" Fuss quipped. "I don't know. That is the major risk if you're substituting for market risk with specific risk. You'd be better off if I'm wrong to run out and buy the longest thing out there."

Fuss added that investors also can consider currency to balance the risk of rising rates, Fuss added.  "To the degree you have the ability or the desire to deal with other currencies, you can come up with some alternatives here that make every bit as much sense. We've done that with a chunk of the portfolio. We have Canada, Australia, New Zealand."