It's important to keep perspective. While investors should be mindful of rate risks, the Federal Reserve has committed to keep borrowing costs low as long as unemployment remains high. That means a sharp rate increase is unlikely in the short term. However, the Fed could begin to push rates higher if the pace of economic recovery picks up, and inflation rises above its current 2 percent.With inflation risks in mind, last week star bond trader Bill Gross, manager of the world's largest mutual fund, Pimco Total Return, offered advice in a commentary to investors: "You should avoid (long-term bonds), and confine your maturities and bond durations to short/intermediate targets supported by Fed policies."
Bond Investors: Heed Warnings About Rise In Rates
Check Out Our Best Services for Investors
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Model portfolio
- Stocks trading below $10
- Intraday trade alerts