The Danger of Bonds -- WorldTradeStocks.com

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Subject: The Danger of Bonds

Author:
Lussenheide

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Date Posted: 12:31:52 01/19/03 Sun

The vast majority of investors do not understand the relationship that bond
prices have with interest rates. They don't realize that when interest rates
are rising, that the value of their bonds and bond mutual funds actually
decrease in value.

Of course the opposite is true too! When interest rates decline, the value
of bonds increase. Here are a couple of examples of how this has worked in
both rising and falling interest rate environments: in 1999, as the Fed
raised rates to slow down the economy and tame the stock market bubble, long
term Government bonds lost 13% of their value. In 1985, when the Fed was
lowering rates aggressively from levels of the high teens in the early
1980s, these same bonds would have gained an impressive 36.34%!

Learn more about the inherent risks that Bonds have and how timing of this
asset class reduces risk and preserves capital, in the rest of my article
at:

http://home1.gte.net/res0uuwy/index.htm

In addition you can read my current market commentary and the status of my 7
market timing models.

I'm looking forward to your visit!

Bill Lussenheide

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