How Much Risk Are You Willing To Take?

    Most investors are very comfortable holding bonds and bond funds right now.  After all, bonds have been going up, who wouldn’t be comfortable?

    But in investing, what goes up will almost always go down again.  The market value of bonds historically go down when interest rates go up.

    The question is not when bonds will go down.  No one knows!  The real question is risk and reward.  How much of each is there?  When  they get out of balance, smart investors move.

    So, ask yourself if the reward part, the low interest you are getting, is enough to warrant the risk to your principal if rates go up.  How high could rates go, or how low can bond prices go?  I don’t know, but I do know how high rates were  a few years ago.

    Today’s bond market reminds me of the stock market 5 years ago.   Caveat Investor!