Everyone thinks that bonds, including U.S. Treasury Bonds are safe investments. Think again. If interest rates, which are at historical lows, rise, the market prices of bonds go down. Longer term bond prices go down real far down, and mutual funds that invest or trade bonds, will get hardest hit, and this has nothing to do with a credit rating, or the issuers’ ability to pay.
For example, if interest rates are 4%, and double to 8%, a thirty year bond which was purchased at par, let us say $100 per bond, would by definition lose 40% of its value.
Now of course,...
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