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Today many investors are very worried about the stock market. The volatility in the equity markets has made many investors draw out money from equity funds and put the money in bond funds at a record pace.

When you invest in bonds you are lending your dollar. Lending your dollar means to give your dollar to an entity that will pay you interest on your dollar for a specific length of time. The basic concept that bond investors must understand is how bonds fluctuate in value. When interest rates go up the value of bonds you hold goes down & when interest rates go down the bonds you hold go up in value. Today, interest rates are being kept at very low levels by the Federal Reserve policies. There will come a time when the Federal Reserve will not be able to hold interest down. They are sitting on a very tightly coiled spring (interest rates), when the Fed starts to release this coiled spring rates will rise very fast causing large losses in bond portfolios.

Investors should make sure portfolios are not over weighted in bonds. Not sure about your portfolio? Be sure to bring this up with your investment advisor. For more information on investing in bonds, portfolio management or for other financial advice, speak with an investment advisor at DLG Wealth Management today, located in Albany, Saratoga or Utica NY.



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