After you’ve determined your overall exposure to bonds, you’ll need to move to curtail your exposure to the riskiest, long-dated maturity bonds such as the kind of long-term Treasury bonds found in an exchange-traded fund (ETF) such as the iShares Barclays 20+ Year Treasury Bond (TLT).
The reason: the long end of the yield curve is the most susceptible to interest rate risk. So, if bonds begin to sell, yields will begin to spike and bond prices will begin to fall—and the biggest damage will occur in long-term, 20-plus year Treasury bonds. Similar pain also is likely in 10-year Treasury notes, which are widely held by many investors, and many bond mutual funds as well as many growth and income funds.
By reducing duration in your bond holdings, you’ll be in a much better position to prevail during the next bond market meltdown.