There's no pleasing some market watchers on interest rates. When rates plummeted during and after the financial crisis of 2008, there were worries that retirees couldn't get enough yield to live on. Now that rates are likely to begin rising again this year—potentially as soon as next week's Federal Reserve meeting, though most economists don't expect the first hike to come until September or later—the worry is that rising rates will make the value of bonds fall so much that holders still get hammered.
Read MoreRisk looms for bond investors
That is driving a short-term drop in bonds—the Barclays Aggregate U.S. Bond Index is down 1.7 percent so far this month—but history says it's no big deal. When interest rates rise in the U.S., investors take minor, quickly recovered hits in total return, or none at all. And the impact of a rising economy on corporate profits and stocks more than makes up for it before long.
Many investors may be confused about the relationship between bond prices and yields. Higher rates mean lower bond prices—it's called an inverse relationship. It's also taken on more importance with the anticipation that the Fed will soon raise interest rates. That's driven a mini exodus from bond funds in the last month. But a deeper look at the numbers suggests that what's coming may be less scary than many small investors think.
Longer-term bonds lose more principal value than shorter maturities as rates rise. The higher-yielding the bond is, the less the relationship has tended to be. But in all classes, equally as important to the inverse relationship between bond prices and yields is this: Historical data shows the declines are small and soon reversed. The total-return losses are small because, historically, the lion's share of a bond's return has been income rather than principal gain. As the income rises, unless credit-quality deteriorates, the value of the bond is going to at least stabilize relatively quickly.