Interesting to see posts about bonds from 2-3 years ago. It’s likely that most of these bond holders had their safe/stable bond holdings get crushed by higher interest rates over the last few years. I know I certainly did.
My take on the foreign bond question is that it does not hurt to have some of your bond allocation in foreign fixed income. I like the call out on a Total International Bond fund/ETF that’s hedged. But save yourself the tax headache of having to pay foreign taxes and take a foreign tax credit by holding the fund/ETF in a non-taxable account.
Here’s my “filter”: We own stocks for “return ON our money” and bonds for “return OF our money”. If a foreign bond fund doesn’t make you feel comfortable, or your planned allocation to it won’t “move the needle”, then maybe Uncle Sam should be your holding.
Many investors hold bonds to provide ballast in their portfolios. I don’t believe foreign bonds are superior to domestic bonds in fulfilling this role. Foreign bond funds are often more expensive than domestic bond funds and developed market bonds have yielded less during the past several years. U.S. investors don’t need to own foreign developed market bonds. EM bonds may be an option for investors who can tolerate the added volatility and potential losses.
Markowitz influenced my attitudes about Fixed Income a lot. I like Treasuries, Tips, and Stable Value Funds. These are about as close to ‘risk free’ as an asset can be for a US investor. I compare SEC Yields, and decide where to invest. Right now, with a 2.6% yield, it seems to make sense to have all my fixed income in a Stable Value fund.
Note: not all Stable Value funds are created equal. It’s important that it be backed by top-rated insurers. Also, SV funds often have redemption limitations, so one should understand those and know they can live with them before committing large sums to the fund.
Interesting to see posts about bonds from 2-3 years ago. It’s likely that most of these bond holders had their safe/stable bond holdings get crushed by higher interest rates over the last few years. I know I certainly did.
My take on the foreign bond question is that it does not hurt to have some of your bond allocation in foreign fixed income. I like the call out on a Total International Bond fund/ETF that’s hedged. But save yourself the tax headache of having to pay foreign taxes and take a foreign tax credit by holding the fund/ETF in a non-taxable account.
Here’s my “filter”:
We own stocks for “return ON our money” and bonds for “return OF our money”.
If a foreign bond fund doesn’t make you feel comfortable, or your planned allocation to it won’t “move the needle”, then maybe Uncle Sam should be your holding.
Many investors hold bonds to provide ballast in their portfolios.
I don’t believe foreign bonds are superior to domestic bonds in fulfilling this role.
Foreign bond funds are often more expensive than domestic bond funds
and developed market bonds have yielded less during the past several years.
U.S. investors don’t need to own foreign developed market bonds.
EM bonds may be an option for investors who can tolerate the added volatility
and potential losses.
Markowitz influenced my attitudes about Fixed Income a lot. I like Treasuries, Tips, and Stable Value Funds. These are about as close to ‘risk free’ as an asset can be for a US investor. I compare SEC Yields, and decide where to invest. Right now, with a 2.6% yield, it seems to make sense to have all my fixed income in a Stable Value fund.
Note: not all Stable Value funds are created equal. It’s important that it be backed by top-rated insurers. Also, SV funds often have redemption limitations, so one should understand those and know they can live with them before committing large sums to the fund.
If you own a foreign car you bought a depreciating currency hedged asset, certainly an A rated or better foreign bond is no worse.