Government Bond Funds Risk, Dynamic Bond Fund Income Fund Vs Dynamic Bond Fund

Fixed rate government bonds can have interest rate risk which occurs when interest rates are rising and investors are holding lower paying fixed rate bonds as compared to the market.

Government icon white background. Individual investors buying bonds can generally expect risk to trend downward as bonds age and approach. Although bonds are considered safe there are pitfalls like interest rate riskone of the primary risks associated with the bond market. For instance the yield on the indian 10 year note is over 7 these days while quality corporate bonds of a similar length average about half of this amount.

This isnt an issue if you plan to hold an individual bond until maturity but if you sell a bond before its maturity dateor if you own a mutual fund or etf that focuses on higher rated bondsyou are still taking on the risk of principal loss no matter how highly rated the investments. Bond funds are particularly sensitive to interest rate risk since unlike individual bonds they dont have a maturity date. See risk data for jpmorgan government bond fund hlgax.

Treasury bonds t bonds as risk free investments. However as with treasury notes even high rated bonds are at risk of short term principal loss if interest rates rise. While there is almost always a ready market for government bonds corporate bonds are sometimes entirely different animals.

Reinvestment risk means a bond or future cash flows will. In this way funds can lose value and investors dont have the certainty of receiving all of their principal back at some point in the future. Risk can fluctuate with bond funds because the fund is constantly buying and selling bonds.

The united states government has never defaulted on a debt or. This narrows the risk factors but it also means that government bonds and bond funds are acutely sensitive to interest rates mckeon says. An analogy often used is a teeter totter he says.

Research information including volatility and modern portfolio theory statistics beta r squared etc for jpmorgan government bond fund.