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Usually you would much prefer to own the bonds themselves than bond funds--to avoid taking some of the interest rate risk. However, the recent decline in housing starts has some thinking that interest rates may have peaked. This may not be the case, but if they have bond funds become more attractive.

Of course, buying the bonds themselves (as opposed to bond funds) at the interest rate peak is an excellent way to lock in good yields and have the potential to earn capital gains when interest rates decline.

There is a bond board on the fool where these issues are discussed. Enter the word bond in the board box below and press find.
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