Foreign Bonds Anyone?

[innova]

But you also have to consider the fact that currencies are relatively uncorrelated with either US stocks or US bonds. So yes, they bring some risk to the party, but adding non-correlated risky assets to the portfolio brings down the overall level of risk, often without reducing your return much, if at all.

Thats a good point, and one I overlooked. However, most academics would argue that currencies themselves (and thus the currency-derived portion of a foreign bond's return) has no expected return over the long term.

Swedroe argues that foreign bonds give equity-like risk, and that risk tends to show up at the worst time.. when equities are blowing up. That forms the basis of my point about holding bonds for safety and negative correlation - but your point is taken.

 

[Neongreen]

If anyone wants to lend me a million or two to stick into a New Zealand 10% 5 year CD just give me a yell.

'Investment fees' of only 0.5%, plus tax of 30% on the interest
Only risk is that the NZD might fluctuate and the chance that I may run off with the millions

 

[soupcxan]

Thats a good point, and one I overlooked. However, most academics would argue that currencies themselves (and thus the currency-derived portion of a foreign bond's return) has no expected return over the long term.

Agreed that FX is a zero sum gain in the long run. Of course, the same could be said for commodities (your real return should be zero).