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  1. 15-10-2018, 05:38 AM #1
    GTM 3442
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    Quote Originally Posted by blackcap View Post
    That is the question I have too. Rising interest rates could decimate a bond fund. Or do these funds just buy at par when a bond is issued and hold till maturity and take the interest along the way, ignoring the rise and fall in the actual value of the underlying securities?
    AFAIK, because they have money coming in all the time, they have no option but to buy on the secondary market.
    Last edited by GTM 3442; 15-10-2018 at 05:39 AM. Reason: Add important preposition
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  2. 15-10-2018, 08:10 AM #2
    blackcap
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    Quote Originally Posted by GTM 3442 View Post
    AFAIK, because they have money coming in all the time, they have no option but to buy on the secondary market.
    Thanks for thee replies. Ok that makes sense. So a conservative "bond" fund can then quite easily suffer capital losses in a time when the discount rate is rising. Interesting.
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