No. of Recommendations: 0
GWPotter: "There is interest rate risk for sure - but if the bonds are held to maturity (and that is what I understand is their practice), there will be no principle loss -- only the loss of 1% return for the average 5.96 years - or less than $10 per bond."

Unless the funds starts sufering a lot of redemptions, in which event it may need cash it obtains from selling bonds or after redeeming non-bond assets its bond allocation/balance is too high and the fund must rebalance by selling bonds.

Mutual funds with bonds can effectively be forced to sell bonds when they might otherwise prefer not to sell.

Regards, JAFO
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