Bond Fund Investors Beware!

A rise in interest rates would inflict big losses on safety-seekers
Photograph by Michael Rowe/Getty Images

Paul Smith, a retired attorney in Oakton, Va., lost 30 percent of his 401(k) retirement savings during the financial crisis. He shifted his money to bond mutual funds from stocks and now holds at least 60 percent of his retirement savings in fixed income. While payouts from some of the bond funds barely keep up with inflation, he’s worried that stocks could see another decline. “Both my wife and I are very risk averse,” the 64-year-old says. “Frankly, the volatility in the market is very much a concern to us.”

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