1. Remember your time horizon
As interest rates rise, your bond fund will buy higher-yielding issues. That's good news for people with long-term prospects. Investors would earn a higher interest rate, though there may be some short-term pain, the mathematics of the bond market is not possible, even with a higher interest rate, to offset some of those losses.
2. Check the target date fund
To avoid that the same shock, the target-date fund review you to know what percentage invested in bonds, and what kind of bond. Consider switching funds if you are not comfortable with the fund choice. Many investors are surprised that the 2008-09 target date retirement funds they drunk right along with the stock market.
3. Advocates for more options
Outside of pension plans, investors have access to investments that aim to ply a middle ground between equities and bonds risky, choices that are not available in most 401 (k) plans, but some companies offer them retirement-plan participants access to window broker, which gives it access to their stocks, mutual funds and ETFs through a self-directed brokerage account. Lobby your employer for this option as a low-volatility ETFs, funds and absolute return bond-like, and as an individual.
4. Shift to short-term bonds
A good approximation of the risk is that for every percentage point of increase in interest rates, the value of your bond fund will decline as much as the overall duration ("duration," roughly speaking, is the average maturity of the bond fund holdings). Generally, longer-dated bonds most suffer as interest rates rise. If the duration of the fund is five years and the resulting increase of two percentage points, the value of the fund will be down about 10%.
5. Review your allocation targets
For many people, the formula has 60% equity, 40% bonds, "said Bill Harris, chief executive of Private Capital, a wealth management company online in Redwood City, Calif." It may not be NAMAs today is a very dangerous time to be a weight in long-term bonds, "he added.
6. Diversify your bond holdings
Some advisers suggest that investors may look to international bonds, or bonds surpass the quality, if they are willing to accept the credit risk. Look at 401 (k) investment menus you to see if you can shake your bond holdings slightly. High-yielding bonds
If the 401 (k) bonds do not offer many options and you've got another tax deferred account such as an IRA, consider buying bonds to there, where you will have more choices.
7. Consider a stable-value fund
Stable-value funds are an alternative to bonds, assuming a 401 (k) to their offering. With instrument insurance company, you pay a specified interest rate. "Think of them as CD mutual funds," said Mr. Batterman.