Versatile Bond Portfolio only holds bonds that mature in two years or less. Couldn’t I get a better return on long-term issues?
Though returns may be higher, long-term bonds carry greater risk of price fluctuations. When interest rates rise, prices of existing long-term bonds can fall as sharply as stock prices. This is true even of long-term bonds issued by the U.S. Treasury or other government agencies. As a result, long-term bonds don’t fit the Portfolio’s conservative strategy for earning higher returns.
