Yet rates have not gone up, and the losses people feared have not happened. In June, the Federal Reserve plans to stop efforts designed to stimulate the economy and keep interest rates down. Analysts debate if that means rates will stay down or rise.
Further, Standard & Poor's warned that the U.S. government had no good plan for dealing with its massive debt. That warning has the potential to lift interest rates and cause bond values to dip. Standard & Poor's threatened to downgrade U.S. bonds if the federal government did not get its act together.
Unprecedented times
But we are in unprecedented times, and even the smartest professional bond investors do not agree where it is safe to invest. Pimco's Bill Gross recently said "no" to Treasurys. DoubleLine Capital's Jeffrey Gundlach said he was buying them and avoiding high-yield bonds because as the government withdraws stimulus, the economy might slow.
All this leaves conservative investors in a quandary: Should they park money, as many have for three years, in money market funds and CDs that pay almost nothing while they wait for better-paying U.S. Treasury bonds and CDs to arrive? Should they take a chance on riskier bond funds that might pay more than safer funds today but turn as cruel as stocks if the end of the Federal Reserve's tinkering leads to a downturn?
Cautious financial planners say this is no time for savers to grow impatient and take on greater risks. Financial planners such as Gary Schatsky are trying to talk clients into taking fewer risks than they advised a year ago.
"People rightly have great concerns" that encompass opposites, from inflation to a potentially slower economy as government stimulus is withdrawn, Schatsky said.
