Indeed, no strategy is without potential pitfalls. Hunkering down in short-term bonds might seem like a "no-brainer," noted Benz of Morningstar, but investors who follow that path might be sacrificing returns. Despite the nervousness surrounding interest rates three years ago, the typical intermediate-term bond fund has gained nearly 2 percentage points more, on an annualized basis, than the average short-term bond fund since 2011, according to Morningstar.
While rising rates are a legitimate concern, advisors say investors should keep things in perspective. It's true that inflation can lead to higher interest rates and erode the purchasing power of bond investors' future cash flows, but inflation, they say, isn't much of a threat, given the lingering softness in the labor market and constrained bank lending.
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"A real risk in the fixed-income markets is inflation rearing its ugly head, and there are no indicators that this is going to be an issue in the near term," said Aronson of Mosaic FI.
Demming said investors need to reset their expectations and accept the probability of lower returns in the fixed-income arena. Over the last 20 years, bonds have provided a 6 percent annual return, he noted, adding that given current low yields and the rising-rate environment, investors shouldn't expect a repeat performance.
"Five years ago you could put your money anywhere and make easy money," he said. "Today we have to roll up our sleeves and be more selective. But your returns are probably going to be lower, and you just have to accept it."