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I've considered investing in a mid duration(4-5 year) safe (avg. AA rated) bond fund. The only way I can see myself losing some money with such a fund is if inflation picks up.

Under what scenarios does such a fund preform well?

How about during market crashes and recessions?

My logic tells me that in such cases investors will move to the safety of bonds but I suppose that is not always the case.

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Bonds are currently high in price but there are some predictions of them going higher.

An economic slowdow could send bonds higher but that's also assuming that inflation declines. With an increasing government deficit, it would be possible, as in the future, to have both slow growth and high inflation. That's stagflation.

If worried about a loss on bonds then there are ETF's which are hedged investment-grade bond funds.

Or if sure about economic predictions then there are closed-end-funds that leverage investment-grade bonds.

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  • Thanks for the feedback, the inflation puzzeles me as to where its going. Your prediction of bonds going higher in a slowdown is based on the "flight to safey" ? – user123124 Feb 18 '20 at 6:14
  • Well, if the current virus slows-down but the economy begins to show a decline, I personally don't need to call that "flight". If the economy begins to show a decline then likely stocks will pull-back and bonds will go-up. – S Spring Feb 18 '20 at 8:19
  • In an economic decline, government bonds could go up the most, with investment-grade bonds possibly up less, and with high-yield bonds possibly going down. – S Spring Feb 18 '20 at 8:30
  • "move to safey" then depending on the severity of the decline – user123124 Feb 18 '20 at 8:59

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