Today we continue our discussion on international bonds. We’ll begin with a Vanguard study.
Vanguard reached the same conclusions we discussed in yesterday’s post in their February 2014 research paper “Global fixed income: Considerations for U.S. Investors.” The paper states:
- For the average investor seeking to further mitigate volatility in a diversified portfolio, foreign bonds can play such a role.
- For investors looking to add exposure to foreign bonds, we show the substantial benefits of hedging the impact of foreign exchange movements.
- While the bonds of any one country maybe more volatile than comparable U.S. bonds, an investment that includes the bonds of many countries and issuers could benefit from imperfect correlations across those issuers.
- Our analysis shows that in aggregate, and with the appropriate hedging of currency risk, an investment in the broad international bond market can be less volatile than an investment in the broad U.S. bond market.
Read the rest of the article on Seeking Alpha.