I have some very conservative investments, mostly mutual funds. What will happen to them in a deep recession?

Question

I have some mutual funds which are made up of very conservative investments - nothing too risky. Over the past few decades this fund has done nothing but grow slowly. Sometimes it goes down a bit, sometimes it spikes a bit, but overall it shows a pattern of growth, which is great.

What will happen to these investments if we go into a bad recession?

Will they decrease in value a lot?

Should I try and head this off by changing my portfolio? Or just ride it out?

Thanks!

Answer 1

Your money devalues through inflation on average by about

3 - 4% a year. You usually get 5% in a cash portfolio (interest), which keeps you just above inflation.

If your fund makes less then inflation, you slowly loose your money.

About 90% of all funds are money lossers and I have yet to figure out, how the existence of funds is justified.

Answer 2

i agree with bosai, mutual funds suck!!!!

Answer 3

If they made it through 2000-2002 ok I wouldnt worry about it much.  And if you still have a long time to invest I wouldnt worry about.  Just hang on and dollar cost average.

Answer 4

I have read that if you're not going to buy individual stocks, that your best choice is Vanguard's S+P500.  It has by far the lowest fees of all the mutual funds.  Apparently mutual funds are sneaky when it comes to charging you fees and they're hard to see.  Vanguard's S+P500 is a slow and steady horse with virtually none of these fees.  I think it averages around 9-12%.  I'm not an expert though, so do your own research.

Answer 5

Generally, very conservative investments lose less value than riskier ones during recessionary periods.  The upside potential is lower, but so is the downside.  Definitely ride things out.