I am leery about the current equities market and see very little upside and potentially a lot of downside when a lot of problems become more apparent (interest rate hikes toward the end of the year, reduced stimulus spending, government debt becoming more and more of a problem).

Therefore I want to move most of my portfolio to fixed income and/or cash. What are the best fixed-income classes I should be investing in? I don't know much about the different types of bond classes and which ones would be favorable in today's economic climate. I'm looking for ETFs to invest in and I'm Canadian if that matters. Been looking at iShares bond ETFs since I can get them hedged to CAD which would be preferable as that's my home currency.

Options:
-XBB.TO: Wide spectrum of Canadian govt (all levels) and corporate bonds
-XCB.TO: Canadian corporate bonds
-XGB.TO: Canadian govt (all levels) bonds
-XLB.TO: Long-term (10+ years maturity) Canadian govt and corporate bonds
-XSB.TO: Short-term (1-5 years) Canadian govt and corporate bonds
-XHY.TO: US High Yield corporate bonds hedged to CAD
-XIG.TO: US Investment Grade corporate bonds hedged to CAD

I'm open to suggestions of foreign (ie. US) ETFs but don't really want to expose my portfolio to USD since I live in CAD and I don't particularly think the USD is looking good long-term either (in my amateur view).

And perhaps I should be looking at different asset classes outside of bonds altogether - open to suggestions.

Thanks.

None of them are very good in the current environment. Short term interest rates on low risk bonds are really low (like no return net of inflation) so you are just treading water with these investments. Longer term bonds have slightly better returns, but if governments stop artificially depressing interest rates then it's possible (probable?) that long term rates increase and long term bonds take a big capital hit.

Corporate bonds at least have some strong return potential, but it you're worried about equities collapsing then you should be partially worried about corporate bonds collapsing with them, so this isn't a successful way to avoid risk (you can reduce it, though). Also, the "opportunity" on corporate debt has kind of passed as corporate bond yields dropped as equities took off.

Finally, keep in mind that returns on interest in Canada are taxed much more than capital gains, so that's another mark against bonds.

There's really noting to be excited about in the bond market, but if you fear an equity market collapse you may have to go there reluctantly, which is fine.

I'm not a fan of casual market timing, but if you're determined to exit equities in favour of cash or fixed income and your goal is short term preservation of capital rather than pure speculation on a very few specific possible future outcomes, I'd think insured high interest savings accounts or GICs or money market stuff instead of bond ETFs/funds.

For all intents and purposes, you'd be committing money at the top of the market if you bought a bond ETF/fund. You're not giving up much in the way of yield in relative terms if you stay in cash equivalents, even less so in risk adjusted terms. BoC will raise their near zero rates as soon as possible, so wait it out and see what happens. Concerns over CAD strength might delay this longer than in other countries, but then again our economy held up pretty well and is showing signs of improvement, so they can only hold out so long before limiting inflation becomes the overriding concern.

In the meantime, a credit union like Achieva Financial is insured beyond the normal $100k CDIC limit and offers a 1.85%/a daily interest savings account if you don't want to lock your money up in GICs and can't get a better money market rate (I have no idea what's on offer).

Best of luck.