The following are the countries that MSCI/Barra has created sovereign debt indices for according to the literature I picked up at the Super Bowl of Indexing.
- Austria
- Belgium
- Finland
- France
- Germany
- Greece
- Ireland
- Italy
- Netherlands
- Portugal
- Denmark
- Norway
- Sweden
- Switzerland
- UK Gilts
- Australia
- Canada
- JGB
- New Zealand
- Czech Republic
- Hungary
- Poland
- South Africa
Owning foreign individual bonds is just about impossible for most retail investors. Obviously ETFs are not individual bonds but they would allow do-it-yourselfers to isolate some very narrow themes that for now can't be captured.
Bond exposure to a healthy economy like Finland or Ireland, without having to study credit risk of a company, is at least intriguing. Learning about the current state of an economy like maybe Portugal or Belgium is probably easier than learning about a stock.
In a typical 70% stock 30% fixed income portfolio it would not be reckless to allocate 10% of the fixed income portion, or 3% of the whole pie, into sovereign debt of a country you are comfortable with. The bonds aren't going to zero, realistically, even if you pick poorly.
7 comments:
Ot: All etfs within a sector, as we know, are not created equal. I just pulled up performance chart in biotech. Look at Ibb versus bio tech from power share and first trust. When there's this divergence I wonder if it's a wake up signal for stenngth in the whole sector. Or is it just one stock in this sector moving the better etfs?
Roger, keep writing about bonds and fixed income. I know I have a lot to learn.
Biotech seems to be especially tricky. All of the ETFs are so different in terms of holdings that I would think they would all take turns providing performance leadership.
Speaking of income, I wonder how you find out what the Wisdom tree divdend yield will be?
instead of going to the page for the fund you should go to the page for the index, that has the yield. You need to subtract the expense to get a feel for what the ETF will ultimately yield.
However, read the fine print. A portion of the dividend may be retained as part of the NAV for a short while as the funds get going. I was not aware of this until very recently and does not change my opinion or the manner in which I have started to use a couple of them but you should learn about this first hand.
Roger, When looking at ytd performance or just downloading price performance for analysis, how are dividends handled? Do they ever get baked into an etf,cef, or oef price, or it just has to be mentally down?
A warning when looking at bond fund yields: they are often flat out wrong. Sometimes you'll see a trailing 12-month yield, which is only accurate if market yields haven't moved over the last 12-months. Sometimes you'll see a "indicated yield," which is usually the last divided extrapolated over a year. But often the fund pays at different rates at different times of year due to seasonality of couponing.
If its an index fund, try to find the yield of the index. For example, if its AGG, which is the Lehman Aggregate, Bloomberg lists the dividend as 4.66%. But the Lehman Aggregate Index's yield is 5.13%. That's more accurate.
to 7:03 Usually YTD perf is just the price. You can check the historical prices on Yahoo finance to be sure though.
TomG makes a great point. Going a little broader you need to stay reasonably current on the current yield curve of what you are investing in, bond wise, if you are managing your own portfolio.
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