Rolling the Currency Dice: Investing in International Bond Funds

by John Markese

Rolling The Currency Dice: Investing In International Bond Funds Splash image

The search for yield and the weak U.S. dollar have prompted individual investors to set their sights abroad, and to consider investing in foreign bond mutual funds. International bond mutual funds, however, have their own unique set of risks. And these risks are magnified by the often rapid ebb and flow of international currency markets.

Yields may be higher in other countries and the dollar may be swooning, but a careful look at international bond mutual funds is in order before you let your money travel overseas.

The Risks

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John Markese is the former president of AAII.


John from California posted over 2 years ago:

Very good overview, but the fund data are now dated. Would be nice to have an update listing current funds and recent performance.

Annette from Illinois posted over 2 years ago:

2007 Data; Please post current .

Gajinder from Texas posted over 2 years ago:

What is the point of putting this table, if you are out of date by four years. One expects better information from AAII.

Rick from Kansas posted over 2 years ago:

Agree, that since data is so dated (sorry), the article becomes less meaningful in regards to the current US dollar value situation. With the US at risk for losing the oil-dollar link,it is even more important, not to mention inflation and a falling dollar vs (some) other currencies. Still, a helpful reminder of risks!

Barry from Texas posted over 2 years ago:

Not sure why the table data is 4 years behind the times, but opens the question: What actual period is the YTD ("year-to-date") performance referring too?

Mark from Michigan posted over 2 years ago:

I do not think there is any value to AAII members to having links posted to old articles in the updatge emails where the article is so heavily depenndent on the article's data unless someone had taken the time to update the article's data tables.

John from California posted over 2 years ago:

The discussion portion of this article has validity worth considering . . . but like most of the rest of you, I have no use for data that's 4 years-plus old.

Phillip from Indiana posted over 2 years ago:

Sure! Nothing like being locked into a sinking dollar. Doesn't have a think to do with the rising price of gold and silver.

Randy from Virginia posted over 2 years ago:

This article is about international funds. Is the advice the same, or would it be different, for investing directly in international bonds?

Kim from New Jersey posted over 2 years ago:

I concur with the chart limitations and in addition the article neglected the whole opportunity with ETF's. With the dollar falling and bond yields higher in developing countries, shouldn't we be considering ETF's in sovereign debt in their currency? The yields would be higher and there would be a gain in the currency exchange. The ETF
has avoided the PIIGS, with maturities around 4-5 years, and a current yield around 4.4% YTD. This is new but wouldn't it be an ideal vehicle if you are willing to accept the risks?

Russell from Texas posted over 2 years ago:

Thanks to AAII the article is dated at the top of the page. It is a reprint of an article from the June, 2008 issue of the AAII Journal.
The information concerning the risks involved in investing in these issues is still valid. You'll have to do some additional research to obtain current data.

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