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Six Advisors on Intl Bonds FWIW
Old 08-18-2013, 08:44 AM   #1
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Six Advisors on Intl Bonds FWIW

I just had a Vanguard Financial Plan done (it had been many, many years since the last one), and among other things they recommended that I allocate 20% of my bond holdings to their new international bond fund.

Here's a very brief but current "review" from six advisors Six advisers on investing in international bonds | OregonLive.com including two of my favorite advisors.

YMMV
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Old 08-18-2013, 05:51 PM   #2
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My vanguard total international bond index is doing better than my domestic bond index so far.
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Old 08-18-2013, 07:11 PM   #3
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It doesn't appear those advisors are big fans. I think a small allocation is fine, but I would consider it at the same risk level as equities and allocate accordingly.
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Old 08-18-2013, 07:42 PM   #4
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I'm not as interested in their volatility as with their correlation to other asset classes (especially US equities). I'd look harder at them if they offered a good diversification opportunity for me, but the advisors in the article generally agreed that they don't.

Comment: The papers and books I've read tend to boil down the price relationships between asset classes to a single number (the correlation coefficient). This is based on how the assets have behaved in the past. But if fundamental relationships change it would drastically modify these correlations. I'm thinking specifically about historic underpinnings of the way asset classes relate to each other, things like the US dollar serving as the world's reserve currency, investor faith in repayment of US government debt, the commitment of the US to low inflation rates, etc.

Maybe it's obvious, but just because asset classes have been highly correlated in the past doesn't mean they will be in the future. Maybe "it's different this time." Still, I wouldn't know how to defend against these changes.
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Old 08-18-2013, 09:04 PM   #5
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Quote:
Originally Posted by shasta View Post
My vanguard total international bond index is doing better than my domestic bond index so far.
+1 but it is way too early to tell.

I have much more confidence in Vanguard than I do in these 6 FAs.
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Old 08-19-2013, 09:23 AM   #6
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Quote:
Originally Posted by Midpack View Post
I just had a Vanguard Financial Plan done (it had been many, many years since the last one), and among other things they recommended that I allocate 20% of my bond holdings to their new international bond fund.

Here's a very brief but current "review" from six advisors Six advisers on investing in international bonds | OregonLive.com including two of my favorite advisors.

YMMV
Will you follow Vanguard's advice?
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Old 08-19-2013, 10:20 AM   #7
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Will you follow Vanguard's advice?
I doubt it, but I will listen to the advisor when we discuss the plan this Thursday. Though the alleged low correlation of intl bond funds is (very) appealing, the currency exchange risks bother me, despite Vanguard deciding they can hedge to protect against currency exchange risk - after eschewing intl bonds for how long?

I also realize they give everyone essentially the same financial plan recommendations after establishing an allocation to stocks vs bonds. It's just a canned program matching the broad market (large/mid/small, growth/value, domestic/international stocks and now bonds, bond market duration/risk) - and there's nothing wrong with that for most people. Other than a subtle small, value & emerging market tilt (which Vanguard does not recommend), my AA is pretty much Vanguard/Bogle/Bernstein mainstream anyway.

Just for fun, I am going to ask them when/if they recommend Wellington or Wellesley...
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Old 08-19-2013, 10:30 AM   #8
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I have much more confidence in Vanguard than I do in these 6 FAs.
I have the utmost respect for Vanguard, but I would put Bernstein & Ferri in the same realm. YMMV
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Old 08-19-2013, 11:53 AM   #9
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I am a Vanguard customer, but in general I give more credence to Rick Ferri than to post-Bogle Vanguard.
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Old 08-19-2013, 01:36 PM   #10
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When Dr. Bernstein talks, I listen.

Same with Rick Ferri.
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