It’s one of the biggest worries I hear from investors who hold bonds: what’s going to happen to my portfolio when the Federal Reserve raises interest rates?
My short answer is always the same: don’t worry—it’s not as big of a deal as you think.
That’s true for many bond funds out there—but there are some that are still ticking time bombs because they’re poorly managed. The worst offenders are the ones that aren’t managed at all—the “dumb” funds that blindly track the index and keep a ton of bonds from near-bankrupt companies alongside much better issues.
Funds like the iShares iBoxx High Yield Corporate Bond ETF (JNK) and the SPDR Bloomberg Barclays High Yield Bond ETF (HYG) are the worst offenders here.…