Be warned.

Normally, I do not recommend investments one way or the other in this column. But lately I see a trend that deserves attention. That is because it will affect millions of small investors.

Twenty-five or so years ago, millions of folks invested in government bond funds. These were mutual funds that bought and sold bonds from our government. They were the rage because they offered nice income in monthly dividends. And, of course, government bonds were safe. What a sweet combination: income plus safety.

Millions of investors got burned with those funds. They attacked the investment guys who sold them the funds. “My $25,000 has turned to $20,000!  How can this be? You told me these were safe government bonds. I had my grandmother invest in these.”

The funds lost ground for a simple reason. Interest rates went up. When interest rates go up, bonds go down. Especially bonds that are not going to mature for many years. I will not go into why this is. Just trust me on this. When interest rates go up, bonds go down.

These days millions of small investors are pouring their money into government bond funds. And municipal (tax-free) bond funds. And corporate bond funds.

They are doing this within their 401k plans and IRAs. (Although tax-free funds are not in retirement plans.)  They are doing it with money they had in the bank.