How Much Can You Lose with Bonds?


  • Bonds are typically considered safe investments
  • However, there were decades of negative real returns
  • Drawdowns reached 50% for U.S. Treasuries and Bonds


Inflation greater than 10% was unknown for the majority of people in developed markets before this year, but it is nothing particularly new for emerging market citizens. Russia experienced 15.5% in 2015, India 10.1% in 2013, Brazil 14.7% in 2003, and Turkey 19.6% in 2021. Holding cash becomes expensive as savings rates are often below inflation, so consumers spend their incomes, invest in hard assets like real estate, or try to move their money into different currencies.

U.S. investors need to go back to 1990 for inflation greater than 5%, or 1981 for inflation above 10%. Although the average inflation in the United States was a moderate 3.1% in the 93 years between 1928 and 2021, this includes times with high and low, even negative, inflation rates.

Most investors have portfolios predominantly comprised of bonds and stocks. Although 2022 has highlighted that even government bonds can decline in value, many investors still perceive bonds as safe investments.

In this research note, we explore how much money can be lost with bonds.