The Vanguard Group has posted a new bulletin, Plain Talk on Bond Risks, on its Web site to clear up misconceptions about bond funds, especially concerning their safety. The company said the posting was necessary because of investors' "irrational exuberance" over bond 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 didn't understand that bond prices and interest rates tend to move in opposite directions.
