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Author: Wradical Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35345  
Subject: Re: Worst case for bond funds Date: 5/21/2013 10:59 AM
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What is the worst case for a bond fund holder with no plans to reinvest any income received?

Two bad things could happen:

1. Interest rates go up, and share prices drop significantly, so you realize a loss when a time comes you have to sell. Note that if you continue to hold, at least you will start to see rising dividends.

2. Interest rates don't go up, and the return from dividends goes down as bonds in the portfolio are turned over.

What happened to someone who bought into bond funds at the worst time in the 1970s, for instance?

Depends on how long they held. Bond prices would have gone down, but the current yield would have gone up, then down again.

Bill
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