Foreign Interest: A Closer Look at the International Bond Markets
by Annette Thau
In 2002 and 2003, total returns of funds investing in various sectors of the international bond market have ranged from very good to stellar: between 10% and 30% for each year (according to data supplied by Lipper Analytical). These returns placed these funds among the best performing of all mutual funds during those years.
As always, after a sector of the market has had very good returns, the question facing investors is: Is there still a case to be made for investing in international bonds?
If you have a large and fairly diversified investment portfolio, there is a case to be made for investing some percentage of that portfolio in international bonds. Briefly stated, it is this: Returns from international bonds do not correlate with those of U.S. bonds. Therefore, even though this is a risky class of investments, international bonds can lower the total risk of the portfolio.
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