These own corporate and/or government debt from overseas.
There is much to be said for having a globally diverse stock portfolio. Since French or Japanese shares do not move in lockstep with U.S. shares, the blend is less volatile than any of the components. The case for diversifying a bond portfolio is less compelling, since bonds are less volatile to begin with.
Another matter is yield. The leader in this category is Vanguard Total International Bond (BNDX). Its biggest country weights are in Japan, France and Germany, where high-quality bonds pay not much more than 0% interest. You’ll do well with this fund only if yields go negative, giving you a price gain. (The fund hedges away its currency risk.) In a flat market all you get out of this thing is its 0.6% current yield.
Yields are considerably better, but risk of default considerably higher, in less developed economies. The iShares JP Morgan USD Emerging Markets Bond ETF (EMB) yields 4.6%. Its biggest positions are in issues from Uruguay, Russia and Peru.
For an explanation of our rankings and a directory of fund categories, turn to Forbes Best ETFs.
*Honor Roll member. For the full list, turn to Best ETFs Honor Roll.
For a searchable directory of fund names and tickers, use the ETF Directory.
