If you own individual bonds or bonds within mutual funds, you may want to start taking a more cautious approach to your bond investing. Although bonds are typically considered a relatively safe investment, we may be entering a period where bond prices could be volatile.
We are seeing signs that interest rates could be moving up in the near future. Rising interest rates are not a good thing for bond investors as bonds generally lose value when rates rise. For example, if you own a bond that matures in 10 years, or own a bond fund with an average maturity of ten years, a 1% rise in interest rates could cause your bond investment to decrease in value by as much as 10%.
There are ways to protect, or at least mitigate potential loss in this type of a scenario. Give us a call if you’d like to discuss this in more detail.