Ask Terry Questions Retirement investment with little risk but rewarding returns

Retirement investment with little risk but rewarding returns

By Terry Savage on March 03, 2015 | Investments

Would you recommend the Hoisington U.S. Treasury bond fund for retirement accounts? (WHOSX) Their annual
average returns seem excellent with little risk and high long term results.

Terry Says:  What I am about to say applies to ALL long term bond funds.  The “returns’ have looked good, because when interest rates fall, bond PRICES RISE!  So in addition to getting a small yield, you also get some price appreciation built into the total return of a bond fund — when rates are falling.  BUT when rates start to rise, you are in a fund that becomes less appealing.  After all, it is chock full of long-term, low interest rate bonds — even from the best country in the world!  People will start selling the bond fund because when rates rise they can find other, higher-yielding things to buy. So the price of the bonds will drop — and so will the TOTAL RETURN of the fund!



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