Bond Funds: The Caution Light Is Blinking

Conservative investors are pouring cash into bond mutual funds as if they are expecting a replay of 1992, when the average bond fund returned more than twice what was available at the bank and even nosed out the average stock fund. But investors should take warning. With bond prices at a six-year high, mirroring the decline in long-term interest rates, bonds could be vulnerable to a sell-off. And that means that bond funds at these levels could be a risky investment, too.

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