If you're doing the standard investments in your 401K, you probably have a percentage of your contributions put into a bond fund as part of the usual recommended diversification of investments. Bonds are used to ensure you get returns when stocks are down. The problem is bond funds have to buy bonds even when interest rates are low. Bad bond buys can be irrecoverable whereas the stock market always goes back up.
When interest rates rise, all those low interest rate bonds tank in value. This is the loss you see in your statement. The cure for this is to learn how to buy individual bonds. The first thing you will learn is that buying bonds, not into a bond fund, requires more money.
The Fed is likely to cut rates this summer. Buying now gets you higher rates for long term holding and will put you in a seller's position should you decide to sell. This is why learning about bonds and investing directly is better than buying into bond funds.
The which is opposite to stocks. Most people should only buy stocks in index funds. Buying individual bonds makes sense. Buying individual stocks without insider information is straight gambling.
When interest rates rise, all those low interest rate bonds tank in value. This is the loss you see in your statement. The cure for this is to learn how to buy individual bonds. The first thing you will learn is that buying bonds, not into a bond fund, requires more money.
The Fed is likely to cut rates this summer. Buying now gets you higher rates for long term holding and will put you in a seller's position should you decide to sell. This is why learning about bonds and investing directly is better than buying into bond funds.
The which is opposite to stocks. Most people should only buy stocks in index funds. Buying individual bonds makes sense. Buying individual stocks without insider information is straight gambling.
