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Subject:  Re: Investing in bond funds for trip down Date:  9/12/2007  5:22 PM
Author:  WendyBG Number:  21588 of 36718

<This could cause the long-term bond interest rate to rise.

Isn't this a good thing? The Teasury bond will pay out more with a higher interest rate, meaning a larger yeild. In addition, as markets decline, the bond fund price increaes, which is also good for the holder.>

If you are continually laddering bonds, rising rates are good, because you will rollover your maturing bonds into higher-yielding bonds.

If you have a bond fund, rising interest rates will cause the Net Asset Value (NAV) of the bond to fall, because the fund's older, lower-yielding bonds wouldn't be worth as much. Bond funds never mature. The lower NAV would be bad for the fund investor.

What do most here see as the optimal investment over the next few months to 1.5 years or so?

Personally, I have a ladder of CDs and TIPs. If the stock market has a serious drop, I will buy dividend-yielding stocks and index funds.
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