Earlier this month, U.S. interest rates rose to the highest levels in two years.
Two years is an investment lifetime ago. Most Minnesota bond market investors don’t remember a time when U.S. interest rates have not been artificially low.
The Federal Reserve began talking about tapering in the spring. U.S. interest rates began to rise then and have not looked back.
As a reminder, rising interest rates means that the value of all bond mutual fund shares that you own will go down.
Every bond mutual fund investor that I have ever sat in front of is invested in a bond mutual fund for the safety of their money. Bond mutual funds never provide safety of your money invested when interest rates are rising.
Don’t let your current bond mutual fund investments go from bad to even worse. Now is the best time to make sure that you ask the investment advisor who sold you your current bond mutual funds the following questions.
If you own bond mutual funds in your company 401(k) retirement plan account, you need to ask yourself the following questions.
Why do I currently own bond mutual funds?
Do I own bond mutual funds to diversify my stock market investments?
Do I own bond mutual funds to keep my investments safe from stock market volatility?
How has the recent rise in interest rates affected the value of my bond mutual funds?
How much risk am I willing to take if interest rates continue to rise?
Is the money market an option to keep my investment principal safe now?
An individual investor can lose a great deal of money owning a bond mutual fund when interest rates are rising. Now is not the time for that expensive investment education.
Ric Lager
Lager & Company, Inc.
