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<p>[QUOTE=&quot;GoldFinger1969, post: 8652463, member: 73489&quot;]<b><u>Bonds are ruled by math.&nbsp; The most important rule is that bonds and interest rates are INVERSELY related...when yields go UP, bond prices go DOWN...when yields go DOWN, bond prices go UP.</u></b></p><p><br /></p><p>Yields have gone up across the curve (time spectrum) this year so prices are down a ton.</p><p><br /></p><p><b><span style="color: #0000ff">Bonds have 2 risks:&nbsp; duration and credit. </span></b> Duration is basically maturity....if you invest in a 3-month T-Bill, CD, or money market fund (MMF) you don&#039;t lose money because it re-prices in a few months.&nbsp; If you invest in a 10-year bond like last year at 2.5% and the yield today is 4.15%, you&#039;re down a ton.</p><p><b><br /></b></p><p><b>If you HOLD TO MATURITY, then you get your money back.&nbsp; </b>But if you have to sell or if you view your statement, you&#039;re down or up whatever the price has moved.&nbsp; So asuming no default, if you don&#039;t sell, you get your initial investment (face value) back at maturity.</p><p><br /></p><p><b><span style="color: #ff0000">CREDIT RISK is the risk of default. </span></b> This results in loss of principal.&nbsp; Investment grade bonds rarely default; high-yield or junk bonds often do.</p><p><br /></p><p>Bond funds are good ways to DIVERSIFY credit risk and capture high yields on various investment without betting the farm on 1 maturity or 1 credit.[/QUOTE]</p><p><br /></p>

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