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INVESTOR ALERT: INTEREST RATES AND YOUR BOND PORTFOLIO
2/20/2013
If you own bonds or have money in a bond fund, there is a number you should know. It is called duration. Duration signals how much the price of your bond investment is likely to fluctuate when there is an up or down movement in interest rates. The higher the duration number, the more sensitive your bond investment will be to changes in interest rates. Currently, interest rates are hovering near historic lows. Many economists believe that interest rates are not likely to get much lower and will eventually rise. If that is true, then outstanding bonds, particularly those with a low interest rate and high duration may experience significant price drops as interest rates rise. A new FINRA Investor Alert warns that if you have money in a bond fund that holds primarily long-term bonds, expect the value of that fund to decline when interest rates rise …
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FINRA, the Financial Industry Regulation Authority, is the largest non-governmental regulator for all securities firms doing business with the U.S. public. Created in 2007 through the consolidation of NASD and NYSE Member Regulation, FINRA is dedicated to investor protection and market ingegrity through effective and efficient regulation and complementary compliance and technology-based services. FINRA touches virtually every aspect of the securities business - from registering and educating all industry participants to examining securities firms; writing and enforcing rules and the federal securities laws; informing and educating the investing public; providing trade reporting and other industry utilities, and administering the largest dispute resolution forum for investors and registered firms. |
