https://www.nasdaq.com/article/rates-and-reality-series-are-rising-rates-actually-good-for-bond-investors-cm1088172January 28, 2019, 10:13:02 AM EDT By Matthew Tucker, CFA, BlackRock
Unsplash Previously, we discussed how bond price gains driven by interest rate movements are temporary for buy-and-hold investors. This insight means that those who hold bonds for the long term really need to rethink how they view rising rates. For these investors, falling interest rates are actually a bad outcome, and rising interest rates should be cheered. Unless you own a time traveling DeLorean , the 15% yields from 1981 that we discussed in the previous post are just not relevant today. What investors really want to know is how they should invest in the bond market now. To answer this question, the first thing to do is to identify your investment horizon. How long you plan to be in the bond market should determine how you view changes in interest rates. To illustrate this, let's look at a simple example. Assume an investor purchased an intermediate-term bond fund with a medium level of interest rate risk. There are three possible investment time horizons:
