Should You Still Keep Your Bond Funds If Bond Prices Drop?
Hype about bond investors losing their shirts when long-term bond fund prices drop because of the Fed Janet Yellen's whimsies may be just that: Hype. If the share prices in a mutual bond fund go down, the dividend yields go up. If the price goes down dramatically, the dividend yield also increases, even if not in quite so dramatic a fashion. Bonds are for Investors who are Interested in Investing Bonds and bond funds are not for investors who view investing as another way to gamble. Unlike investors in stocks and stock funds, people who own bonds do not cherish them simply because the prices my go up. Investors own bond funds because they receive dividends every month, and they can do whatever they wish with the extra shares or money. Reinvest Dividends or Keep the Cash People who invest in mutual funds may not realize that they have options as to what to do with their monthly dividends. Typically, investors can reinvest the dividends back into the same bond funds, they can...