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Reply to "bond funds - explain to me how they will decline with rising interest rates"
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[quote=Anonymous][quote]What about if you hold ST or med-term bond funds - those shouldn't be hit much, and the ST ones should rise with inflation, maybe just lagging by a few months. right? [/quote] It depends. Trying to predict how a given product will behave in what may become a loonie market is hard. But, yes, the shorter the duration the less volatile the price, generally. [quote]And for the LT bond funds, wouldn't bond fund managers look at the "break-even" points and figure out when to dump old bonds and buy new ones? [/quote] The break even point for any asset means selling at the same price you paid, wiping out any previous gain. The problem with a falling market is that the asset is going south of the break even price the instant you buy it and not likely coming back. [/quote]
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