Investment Watch

How much have small investors soured on bond mutual funds, given bonds’ wild volatility in recent years? New data from fund tracker Lipper Analytical show that assets of long-term U.S. government bond funds sank to $38.1 billion as of March 31, down a stunning 30% since 1993. The asset runoff has been slow but steady. Yet not all of those assets have fled bond funds entirely. Assets of short- and intermediate-term government bond funds have risen 26% since 1993, to $39 billion now. What many investors have done is trade more volatile long-term bond funds for less volatile, shorter-term funds--giving up some yield but gaining more peace of mind about the stability of their principal.