What should I be concerned about right now by investing in mutual funds that primarily buy bonds?

Question

What should I be concerned about right now by investing in mutual funds that primarily buy bonds?

Answer 1

   Inflation. Bond yields are low (for a time of inflation &more likely) because bonds are a safe place during stock market stress. At some point, bondholders will not be satisfied with 4percent yields, with inflation at 9?percent. to get yield up to 9? percent, bond prices will fall.

    4 percent is about what 10yr. treasuries are paying. There are higher yielding bonds, of course - with more risk. Same will happen to them, though - you'll still get the yield you bought into, but new buyers will want higher yield. yield up, price down - your bond holdings will lose value.

    Buy bonds when inflation is fully priced into the yields - after the stock market loooks safe again

Answer 2

I would first of all look at what fees they have. high or low? a small performance fee is ok, but If they take a fee just for holding your money, maybe you should look elsewhere.

I would then look at their track record, have they proved to produce great results for a number of years? Do they still hold the same management?

What kind of investment strategy do they have? Finding someone that focuses on buying bonds far below par, might be safer and more lucrative. Rather than risking your the face value for a high yield.

there are a number of things to look at, if you are interested, you could read the chapters in "the intelligent investor" by B. Graham regarding mutual funds and bonds.

good luck!