When you buy a fund, the price of the fund is based on the value of the assets. So let's say the bond fund has 1 million shares outstanding and the fund manager buys $20 million worth of bonds at $100 each. The fund price would be $20 ($20 million divided by 1 million shares). Then interest rates go up, and the bonds decline in value to $90 each. The price of the fund drops to $18. As with individual bonds, if you sell now, you'll take a loss. But unlike individual bonds, the fund never matures. Those original $20 million worth of bonds will eventually mature, sure. But the fund manager is unlikely to keep them in the portfolio. They have no reason to. Fund managers are usually incentivized to beat specific benchmarks, like a bond index. For that reason, they notoriously overtrade their portfolios. For example, the PIMCO Income Fund (PIMIX) has a yearly turnover rate of 396%, meaning it sells every bond in its portfolio nearly four times per year. Its cousin, the PIMCO Total Return Institutional Fund (PTTRX), beats that at a whopping 430%, meaning it replaces its entire portfolio more than four times each year. Another large bond fund, the Metropolitan West Total Return Bond Fund (MWTIX), buys and sells its entire portfolio almost five times a year at a 470% turnover rate. All that trading not only runs up costs but also ensures investors will realize losses as rates go higher. Bond funds are a nearly guaranteed way to lose money. It's not always easy to make money in the market, but it can be easy not to lose it. Don't buy bond funds. The end. Good investing, Marc | 
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