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Friday, December 4, 2009

Use Caution If Thinking of Buying Bonds

Recently investors and savers have poured money into bonds and
bond funds, with some persons already seeing price appreciation
that is similar to returns seen in equities.  Experts are warning that
sooner or later with the improvements in the economy, hence the
rise in interest rates, the Federal Reserve will start pulling some of
the stimulus out.  As the ecomony bounces back we shall see raised
rates, making bond prices drop, therefore the bond prices that were
discounted will come back to par.  No one is saying not to buy
bonds, since their prices are still rising, but buy bonds for the
income first versus the price appreciation.

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