KNOW YOUR BOND TYPES

With rates fluctuating, it's good to remember that not all bonds are created equal. Long-duration bonds of 10 to 30 years have the most sensitivity to interest rates, so they stand to lose the most when yields rise. Shorter-duration bond funds decline less in a rising rate environment, but also rise less when times are good for bonds. As in stocks, mixing the volatile with the more stable is a sensible approach. Instead they use stocks or alternative asset classes such as hedge funds for their riskier investments.But this year, the bonds viewed as the safest Treasurys -- have been among the hardest hit. The end of the major fighting in Iraq and the slowdown in corporate scandals and defaults convinced investors that it was safe to move from Treasurys to more volatile parts of the bond market including high-yield corporate bonds.