In September, the Federal Reserve announced that it would begin reducing the size of its balance sheet by letting some of its bonds mature without fully reinvesting the principal. This widely expected move marked another monumental step in normalizing U.S. monetary policy. There are likely to be several impacts from the Fed’s decision over the short and longer term. However, it is important to note that the Fed’s planned balance sheet “runoff” will take a long time. About half of Fed assets are in securities that will take more than a decade to mature. Given this slow pace of “run off,” barring any macroeconomic shocks, the balance sheet’s size is unlikely to fall to pre-recession levels. While the impact on rates may be modest, a well-managed bond fund should be able to help investors navigate a new era of monetary policy.