What is "risk" really?
Risk is the chance of permanent loss of capital.
Volatiliy is the daily, minute-by-minute, change in prices of stocks, bonds and other financial assets.
During periods of price fluctuation, some gut-wrenchingly so, loss of money does not happen until an action occurs. You sell.
Holding a diversified portfolio of great company stocks has never resulted in loss if you did not react to price volatility and sell.
The trendline for equities has been up and all the declines have been temporary.
The question for individual investors is: How much price fluctuation can you stand before you want to give in to your fear that something that has never happened will happen?
Our experience shows that people buy life insurance for these reasons:
One of the primary risks that bond funds hold for investors is interest rate risk.
Bonds increase in price when market interest rates fall. Conversely, bonds (and bond funds) decrease in price (value) when market interest rates rise.
How can you estimate how much the value of a bond fund will rise or fall when market interest rates change?