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Don’t Make Me Say I Told You So 127

The risks associated with buying a single stock also apply to
a professionally-managed and well-diversified portfolio. The

value of your mutual fund investment could drop, and be worth
less than the amount you initially invested. The money invested

in mutual funds is not guaranteed to prevent market losses.

Even bond funds, which invest only in bonds, are not

guaranteed against market loss. When you buy individual bonds,

they have a maturity date. The issuer of the bond promises to
return your principal when the bond matures. When you invest
in a bond mutual fund, there is no maturity date. There is no

point in the future where you are promised a total return of your

principal.

If you invest in a bond, fund and interest rates rise, the

value of the bonds in the mutual fund will drop. If you need
to liquidate your mutual fund when the price is down, you
will likely experience a loss of principal. In addition, mutual

funds are not insured or guaranteed by an agency of the U.S.

government. Bond funds, unlike purchasing a bond directly,
will not repay the principal at a set point in time. Even mutual
funds that invest in bonds issued by the U.S. government are

not insured against loss of principal. While the individual bonds

in the portfolio are guaranteed to pay the stated rate of interest,

Chapter 3: You Must Have Growth In Your Portfolio