A Mutual Decision on Bond Investing
Bf you cheer when the economy fades, youÛªre probably a bond investor. Slower growth means fewer fears that price inflation will increase. Interest rates will probably fall, which means that band prices will rise.</br></br>When you think about buying bonds, you may have bond mutual funds at the front of your mindÛÓespecially if you own mutual funds that invest in stocks. Owning a bond fund seems like a logical extension.</br></br>But funds arenÛªt always the best choice, especially for investors whose stomachs knot every time the market drops. Depending on your needs, you might be better off with individual bonds.</br></br>Bond prices can be volatile. In 1994 and 1995, the market price of long-term bonds (maturities of 20 years or more) fluctuated, up and down, by more than 20 percent Prices fall whenever interest rates go up. In the past, that has sometimes shocked inexperienced investors, who grabbed what was left of their money and ran.</br></br>They might not have done so had they owned individual bonds. If you can hold to maturity, itÛªs safer than any bond fund can be.