The Vanguard Group of Valley Forge, Penn. announced that it has posted a new bulletin entitled "Plain Talk on Bond Risks" on its Web site in an attempt to clear up several common misconceptions about bond funds, especially concerning their safety.
The company said the posting was necessary because of "irrational exuberance" displayed by investors for bond mutual funds this year. "Money is pouring into bond funds at a record pace in 2002 and we want to make sure that investors understand interest rate and other risks inherent to bond fund investments," said Catherine Gordon, head of Vanguard Investment Counseling and Research Group. Gordon said a recent test conducted by Vanguard of investor literacy found that 70% of the respondents didnt understand that bond prices and interest rates tend to move in opposite directions.