Senior Spectrum
Newspaper
Nov 2007
Our Other Publications
Generation Boomer
Magazine
on-line
Golden Pages
Directory
Financial
Don’t Abandon Bonds When Interest Rates Rise
Some investors may hesitate to buy bonds when interest rates are on the rise. However, despite the interest rate climate, bonds should be included as part of most individuals' well-diversified investment programs. If you are concerned about how rising interest rates may affect your bond portfolio, consider the types of bonds you choose and how you invest in them.
Bond prices generally decline when interest rates rise. But bonds don't all react uniformly to an interest rate movement. For example, short-term bond prices usually don't fall as far as long-term bond prices when interest rates climb. And modest shifts in interest rates typically have a minimal effect on the prices of high-yield corporate (“junk”) bonds. They generally react more to the underlying issue's fundamentals than interest rate conditions. (Highyield bonds may be subject to greater volatility and risks.)
Municipal bonds often hold up well against interest rate movements because (a) most of their investors buy and hold rather than trade frequently, and (b) economic growth often enhances financial conditions for municipal issuers. (Interest income from certain municipal bonds may be subject to the alternative minimum tax. Become familiar with the terms, including call features and credit quality, of municipal bonds prior to purchase.)
You may want to consider purchasing issues with maturities that correspond with your financial time frame. Then you stand a good chance of eliminating the troublesome matter of trading value fluctuations. (Estimates of future performance are based on assumptions that may not be realized.)
For more information on bonds contact me. Your bond investment program needs a second opinion, and I can provide that.
(Matt V. Fiamengo is a qualified member of Million Dollar Roundtable as he has helped hundreds of seniors navigate their financial affairs. He is a Chartered Life Underwriter and a Registered Health Underwriter. For an interview or details on this issue, phone him at (775) 851- 8838 or e-mail: MattProClu@earthlink.net)