Ever think about what the rising interest rates will mean to your portfolio? Keep in mind that last June, the Fed raised key short-term interest rates for the first time in four years. So, what's this all signify?
First of all, remember that when interest rates go up, the value of existing bonds usually comes down. Why? Because bond investors like new bonds issued with higher interest rates which tends to drive down the prices of older, lower-rate bonds. Of course, one should recognize that in the long term, higher interest rates usually help bond fund investors earn higher total returns because bonds with such higher rates provide more interest income than the lower-rated bonds.
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