Inflation does not touch your principal value, but it does steal your future purchasing power. Investors in bonds and bond funds must be acutely aware of the risk associated with interest rate changes. When interest rates rise, the values of outstanding bonds fall, and vice versa. In a rising rate environment, while you are receiving monthly bond interest payments as scheduled, your total returns may be eroding because of declining principal values. This is especially true with longer term holdings.
All returns are market-value weighted inclusive of accrued interest.
The modified duration of this index is currently about 4.6 years. The values of marketable securities fluctuate every day. The dollar-weighted average length of time until bonds held by the portfolio reach maturity and are repaid. In general, the longer the average maturity, the more a portfolio's share price will fluctuate in response to changes in market interest rates. Maturity of 4 years or less.