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Overestimating The Safety Of Bonds

Monday, August 23, 2010 - 7:42 PM
This NYT Bucks blog article has good review of the interest rate risk in bonds and bond mutual funds. This excerpt shows how much the value of bond funds can drop:
For every 1 percentage point change in interest rates, the value of the fund will change by the amount of the duration. So if your fund holds bonds with an average duration of eight years, and interest rates go up by 1 percentage point, the value of your fund will drop by 8 percent.

Ken TuminKen Tumin5,471 posts since
Nov 29, 2009
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