Why you should keep an eye on your bonds

Everyone tends to pay a lot of attention to the stock market and very little attention to bonds.

Why? Because they don’t think they have any money invested in the bond market. Or, they think that bonds are completely safe.

Well, you might want to check the performance of your investments before too long because you may be more vulnerable to what’s happening to bonds than you think.

As you’ve probably heard, interest rates are rising and will likely be climbing more in the months and years ahead. I’ve warned you that this was going to happen — because of the humongous US debt level, the tax cuts and other things — but now it really is occurring.

And when interest rates go up, the price of bonds (including what are called “bills” and “notes”) goes down. Automatically!

Those funds you have your retirement money in tend to diversify into bonds. And over the last few decades bonds have been less volatile than stocks have and, so, at least some of the money invested by professionally managed diversified funds are in bonds.

So, you are probably losing money and don’t even know it. Check the performance of your IRAs, 401(k)s and other accounts. If the value is going down, it might not be a problem with the stock market.

It might be a problem with bonds.