Diversify Your Portfolio With International Bond ETFs
September 9th at 6:00am by Tom Lydon
Investors should know better than to put all their wealth into one area. By utilizing foreign bond exchange traded funds (ETFs), an investor is able to spread the risk and diversify a narrowly-focused portfolio.
A prudent way to hedge against the devaluation of the U.S. dollar is through the bond ETF SPDR Barclay International Treasury Bond Fund (NYSEArca: BWX), remarks Gary Gordan for ETF Expert. BWX is showing an income stream of 2.25% with a 0.6% premium to net asset value (NAV) and a average maturity rate of 8 years. It’s up 4.7% year-to-date.
An alternative foreign bond ETF to consider is the SPDR Barclays Short Term International Treasury Fund (NYSEArca: BWZ). Though it has a 30-day SEC yield of 1.15%, BWZ has a faster average maturity of 1.7 years. The result is less risk with an investment that is a currency hedge on top of a low correlation for diversification. It’s up 3.1% in the last three months.
Investors also have to consider foreign inflationary trends, especially when world economies are throwing money around willy-nilly and pushing interest rates to epic lows. That’s when SPDR DB International Government Inflation-Protected Bond Fund (NYSEArca: WIP) may become useful. WIP has an average maturity of 12 years with a SEC yield of 1.75%. It’s up 13.5% year-to-date.
Finally, an investor may want to take a gander at Nuveen Multi-Currency Short-Term Government Income Fund (NYSE: JGT), which provides income through direct and indirect investment in short-term international government securities. JGT is trading close to a 7% discount to its NAV and it has an annual distribution of almost 9% on quarterly payments. It’s up 22.7% year-to-date.
For more information on foreign bonds, visit our international Treasury bonds category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.