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Don’t Make Me Say I Told You So 209
a factor. The yield is the annual return an investor will receive
if the bond is held to maturity. This fluctuation could result in
a loss of principal if an investor had to sell a bond after interest
rates have risen.
Bond Prices and Interest Rates Move in Opposite Directions
Bond Interest
Prices Rates
Interest Bond
Rates Prices
What about the $4.1 Trillion Currently
Invested in Bond Mutual Funds?
Unlike an investment in a single bond, there are no guarantees
when investing in a bond mutual fund. While the issuer may
guarantee the individual bonds in the fund, the value of a bond
mutual fund investment can still rise or fall. Bond funds have no
maturity date at which the issuer guarantees the repayment of
the principal. Even bonds that invest solely in U.S. government
bonds have no guarantee that the investment will be returned
in full in the future.
Chapter 5: Things That Can Wreck Your Retirement
