Price Return and Total Return for U.S. Aggregate Bonds

Investors in the bond markets may have found themselves uncomfortable this year as rising interest rates pushed existing bond prices down. Could this actually be a good thing for long-term investors?

Most of the return from a bond comes from interest income. This is unlike stocks which grow primarily through price appreciation. As rates have increased, new bonds are paying higher rates of interest, and investors in diversified bond funds are already experiencing the benefits of higher income.

Similar to a race car driver making a pit stop before winning the race, bonds in a rising rate environment sometimes face short-term setbacks. This does not change the importance of their role in winning the race of a successful long-term investment experience. If you’d like to learn more about the investments in your portfolio, we’re here to help.