The key word is Bond "funds". If it is a fund, its individual components can be "traded". Therefore, if interest rates rise, a bond's net asset value can decline. If it is not held to maturity, you can lose money. Also, corporate bonds have some of the same risks as stocks -- just ask WCOM and ENRON bond holders. If you buy US bonds or treasuries individually, and you hold them to maturity (1, 3, 5, 10, years, etc.), then theoretically, you cannot lose money. Of course, if you lock in a 4% interest rate for 30 years, and interest rates rise, you will be effectively losing money because every one else wil be making a higher interest rate than you, and in the worst of circumstances, if your rate of return is ever less than inflation, you are really losing money. Still, it is not quite the same as holding a stock as it declines. Analysts and TV idiots are fond of saying, "you only lose if you sell." But there are no guarantees that a stock price will come back in a reasonable time frame, if ever. A government bond, on the other hand, does have a fixed time frame in which your original amount invested will have no theoretical risk. You will always (barring a complete breakdown of the US government, etc.) get your original amount plus interest back. Just keep in mind that the track record of the buying power of the dollars you get back is pitiful, whereas an ounce of gold today will still buy about the same amount of goods that it did when gold was $35 an ounce -- but that is another story which Jim is better at relating.
I remain,
SOROS
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