What About Individual Bonds? There's an important difference between owning bonds and owning bond funds. I do own bonds and will continue to hold them. A bond has a maturity date. On that maturity date, you will be paid the par value of the bond. Unless the company goes bankrupt, you will get the par value - usually $1,000. So, if you paid $1,000 or less for the bond, you'll get all of your money back... and maybe more. Though a bond fund is made up of bonds, the fund itself has no maturity. Therefore, there is no date on which you can assume a return of your capital. If the value of the fund is lower when you want to take your money out, you sell for a loss. In a rising rate environment, the value of the bonds in the fund will decline - which will reduce the price of the fund. "But wait - if I own the bond outright, won't its value decline too?" you may ask. Absolutely, it will. But that doesn't matter if you plan on holding it until maturity. Here's what I mean: Let's say you buy a corporate bond at par that yields 4%. It matures on October 1, 2023. Every October and April, you will receive interest payments equal to 4% annually. Let's assume that this time next year, interest rates have soared. And your bond that you paid $1,000 for is worth only $900. You will still receive your interest payments in April and October no matter where the bond is trading. Unless you are going to sell the bond, it doesn't matter what the price is - because on October 1, 2023, you're going to get $1,000 back. It's why I recommend that bond investors buy only bonds they plan on holding until maturity. If something happens where the bond goes up in price and you have a profit, you can decide to sell it. But assume you're going to hold it until maturity. Bond funds are a dangerous place to invest in a rising rate environment because they are practically guaranteed to lose money. Stick to individual bonds for the fixed income portion of your portfolio. Good investing, Marc | 
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