To diversify my portfolio and maintain income I want to buy into an ETF bond fund (iShares Markit iBoxx £ Corporate Bond fund). However, my dilemma, bonds have had such a good run for the last 18 months, better yielding investment grade bonds are trading above par value, I can only see the original sum invested diminishing. Hence, although bonds are considered for their safe haven status (relative to equities), the poor interest rates have greatly increased corporate bond demand and pushed their price, to unsustainable levels. So my concern is, the risk to my capital is much higher than historically associated with this asset class. (I appreciate I will still get an income, but it doesn't seem so great if my capital is eroded).

Can anyone advise me if my logic is correct, and whether for now it might be the time to avoid corporate bonds? Or point me to indexes which illustrate bond fund performance over the longer term ie. the last 100 years?

Many thanks

I am inclined to agree with Joe Soap that bonds have had their heyday, although they will probably continue to offer reasonable income over and above other fixed interest instruments - to that extent, they do have value as part of a diversified holding. My problem with income shares, which Joe is recommending, is that they are being marked up and down in tandem with more cyclical, "riskier" shares - they all go up, they all move sideways, they all go down, etc.

A lot of advisers and commentators have been saying for a long time that this disconnect is due to change, and that with global economies likely to flatten/fall off in the foreseeable future, solid dividend paying stocks like Vodafone, Astrazeneca and so on will get the price recognition they deserve. Maybe - my issue is the fact that it hasn't happened yet, and the defensive part of my portfolio has underperformed steadily compared to the riskier side.

I sympathise - no-one knows what the next year or so holds for the UK, US or global outlook - one day I think about buying gold; the next, equities..... I'm actually having more difficulty deciding where to put the more speculative portion of my money than the safer part. But I'm using an agriculture fund and another fund that's investing in emerging economies as proxies for this - although I'm seriously thinking of switching into ETFs/ETCs for the usual reasons connected with high fund charges and forward pricing.

Good luck - and wish me some!