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5 Ways to Survive the 2014 Bond Market Meltdown

If the prospect of losing up to 50% in value is scary, here's what to do

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Do you own U.S. government Treasury bonds in your portfolio? Millions of Americans do—and that’s a big problem. You see, because the U.S. economy is the largest, and by comparison, most stable government entity in existence, Treasury bonds have been sought after as a place to park money when global markets are in turmoil. Of course, there’s been plenty of turmoil in the global markets over the past five years, and midway through 2013 we saw the first inkling of what could be the next massive bond market meltdown.

In May, the Federal Reserve began dropping hints that it would start pulling back the reins on its unprecedented $85-billion-per-month bond-buying scheme. That caused a mini-panic in the bond market, and the result was a big selloff in long-term Treasury bonds that threw a big scare into those who thought of the bond market as a “safe” place to park assets.

Frighteningly, just the prospect of the biggest buyer of bonds (the Fed) finally pulling back on its purchases, caused long-term bonds to plunge nearly 16% in just five months. In January, that prospect will become reality, as the Fed already has committed to reducing its bond-buying binge by $10 billion per month.

Now I ask you: Can you afford to lose another 15%, 20%, or even 50% or more when interest rates surge and bond values plummet the next time around?

Here are five ways to avoid wiping out your wealth before the next bond meltdown.

Article printed from InvestorPlace Media,

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