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Euro Bond Index Fund?
Old 07-19-2007, 07:22 PM   #1
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Euro Bond Index Fund?

I am attempting to give my sister the benefit of my vast knowledge of financial planning (ha!). She is a US citizen living in the Czech Republic. I think a good portion of the bonds in her asset allocation should be in Euro-denominated bonds. Vanguard offers European equity index funds, but not bond funds. Is there a Vanguard equivalent in Europe that has a low-cost index fund?

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Old 07-19-2007, 10:26 PM   #2
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If your sister is a US citizen, she would probably be better off avoiding the tax implications that come with buying mutual funds that are not registered in the US. Teach her how to make a ladder of individual bonds instead.

Added: Actually, while individual local bonds may be the lowest cost solution for her, the tax paperwork is not completely painless there either, since she will need to keep track of the exchange rates at which the bonds were bought and sold or matured in order to calculate the capital gains or losses in US dollar terms for the IRS (even if there were none from her perspective in her currency). This problem is avoided if she can get CDs there instead, for which she would only pay taxes on the interest.

Further added: I just noticed that you specified Euro-denominated bonds, not koruna. (I see that Google sez: CR will adopt the Euro in 2012 (maybe).) In that case, other possibilities are FXE and Everbank (if they will take her -- they may not).
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Old 07-20-2007, 07:15 PM   #3
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Got that baaaaa sheepish feeling about assuming euro's instead checking to see what their currency is. Thanks for the advice about the non-US registered funds. Staying with US funds sounds good to me.

That raises the possibility of investing is US $ bonds, but finding a hedge against currency fluctuations. She has suffered these last years by having her assets and income in $$, but her expenses in crowns. With the dollar hitting record lows (at least against the euro, maybe the Czech crown also), this has eroded her purchasing power.

Thanks again for the advice.
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