The Risk Of Short-Term Bond Funds

by Editor | July 6, 2014 3:52 am

FORBES – Did you miss returns from intermediate-term bond funds because you sat in a short-term bond fund waiting for interest rates to rise? A lot of people did. This strategy has backfired as the opportunity cost of not being in intermediate-term bonds has been more costly than whatever damage rising interest rates might have taken away.

Investment articles from 2009 made a solid case for staying short-term, “As markets continue to slide, many advisers are suggesting that investors play it safe. In the world of fixed income, that means staying on the short side of the duration curve to avoid the threat of rising interest rates,” writes an contributor.

A 2010 whitepaper from RidgeWorth Investments states, “Short-term bonds, best defined as fixed-income products that mature within one to three years, can be an attractive solution given today’s historically low yields and potential for rising interest rates.”

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