AccessMyLibrary provides FREE access to millions of articles from top publications available through your library.
Byline: Jeff Brown
Q. I recently invested in several bond mutual funds, and (two weeks ago) the value of all of them went down. Why would this happen, and how can I protect myself?
A. Bond funds operate pretty much the same as individual bonds do, with a major exception that fund investors need to keep in mind: Bond funds don't have fixed maturities, as individual bonds do. So no matter how well you plan, you could get stuck with a loss if you need to sell your fund shares at a specific time.
Two weeks ago, good news about the war in Afghanistan and the economy made investors more enthusiastic about stocks. That reduced the demand for bonds, causing bond prices to fall and dragging down the share price for bond funds. A fund's share price, or net asset value, is the value of all the bonds held in the fund divided by the number of shares owned by investors.
Falling share prices can be surprising for investors who picked bond funds because they thought …