"If interest rates were to rise rapidly there would be significant losses in bond funds," said Mercer Bullard, associate professor of law at the University of Mississippi and founder of investor advocacy group Fund Democracy. "That can catch a lot of people and hit them with losses they weren't expecting."

Ryan Melvey, 21, holds half of his investments in bonds, a $19,000 portfolio that he started at age 16 with about $4,000 he made from busing tables. He was fully invested in equities in 2008 and has since built a portfolio that he believes will perform, regardless of the economy.

"I learned that I never wanted to go through that again," Melvey, a junior at Seattle University, said of his losses during the financial crisis. "I needed to construct a more diversified portfolio and bonds were going to have to play a role in that."

Risking Losses

Melvey, who recently finished a six-month internship at Amazon.com Inc., has 25 percent of his portfolio invested in Treasuries and another quarter of his assets in the iShares Barclays 20+ year Treasury Bond Fund, an exchange-traded fund. If interest rates were to rise 0.25 percentage point, the ETF may lose 4.6 percent, according to data compiled by Bloomberg.

The extent to which a fund is at risk of losses from rising rates depends on its holdings, Bullard said. In 2009, when long-term Treasuries slumped, bond funds posted gains of about 18 percent as lower-rated debt rallied. Once interest rates rise, shorter duration bonds have a lower risk of losses, he said.

The BlackRock Core Bond Fund, which holds a variety of fixed-income securities, may lose 1.3 percent with the same quarter-point increase in rates, data compiled by Bloomberg show. The Pimco Short-Term Fund, the majority of which is invested in corporate debt, may lose 0.25 percent.

Japan's Example

Melvey, a finance major, said he isn't "too worried" about interest-rate risk, pointing to Japan, which has been in a deflationary phase for more than a decade.

"I'd make the argument that interest rates can remain low for a lot longer than people think," Melvey said.