The other option ignored in the article is that people are free to switch from bond funds to bonds and, if rates decline enough, back to bond funds. There is no benefit to sticking with a bond fund when investors can get higher yields with less risk in individual bonds when rates are rising. It isn't like a bad marriage where one may need to stick it out due to the kids or finances. Investors can switch back and forth as much as they want and the bond funds will always welcome them back with open arms.
Many of us here had bond funds up until The Fed indicated they were going to raise rates this year. Those who sold their bonds funds after peak prices when interest rates bottomed out and then switched to bonds when rates started rising have had a pretty decent year and avoided large losses.
For those still skeptical, just type BND into Google and check out the NAVs since inception on the price graph. The prices are volatile, and depending when an investor bought, they might get more or less than their original investment back based upon the specific date they sell. Sometimes just buying or selling
one month in either direction can make a big difference in NAV price, while with bonds held to maturity and bought at par or under they would get back their original investment. Bonds held to maturity have no market risk and bond funds can be quite volatile. That isn't an opinion it is simply a fact of how they both work.
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Of course, market risk is not an issue for investors who hold bonds to maturity because the face value, not the market value, of the bond is received at maturity." - From the St. Louis Fed web site,
Investment Improvement: Adding Duration to the Toolbox | St. Louis Fed (stlouisfed.org)