Most bond mutual funds sank in June. For the month, intermediate-term bond mutual funds lost 2.1%, according to Morningstar.
Rising interest rates caused the red ink. When rates climb, bonds tend to decline.
But millions of fixed-income investors in 401(k) plans avoided the pain by holding stable value funds. These funds reported steady gains throughout the downturn. Although they are backed by bonds, stable value funds are resilient because of insurance contracts that protect principal.