NEW YORK (TheStreet) -- Wall Street strategists are warning investors to be wary of bond funds. When interest rates rise, bond funds tend to drop. Plenty of economists expect rates to rise soon as the economy grows.
Investors recently got a taste of the pain that could lie ahead. During the past month, interest rates on 10-year U.S. Treasury bonds rose from 1.60% to 1.93%. In response to the rate move, iShares Core Total U.S. Bond Market ETF , which tracks the Barclays aggregate bond index, lost 0.6%, according to Morningstar.
Seeing the losses, you may be tempted to dump all your bonds. But a better approach is to diversify your fixed-income portfolio, including some funds that don't necessarily move in lockstep with the rest of the bond markets. Top diversifiers include funds that hold emerging markets bonds denominated in local currencies. ...
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