Less risk with foreign bonds
nvestors often associate foreign investments with higher risk. However, when used strategically, foreign bonds can actually help reduce overall portfolio risk. By diversifying across countries, currencies, and economic cycles, foreign bonds offer stability benefits that domestic-only portfolios may lack. Understanding how and why foreign bonds reduce risk is essential for long-term, disciplined investing. What Are Foreign Bonds? Foreign bonds are debt securities issued by governments or corporations outside an investor’s home country. They may be denominated in the issuer’s local currency or in a major global currency such as the U.S. dollar or euro. These bonds typically provide regular interest payments and return principal at maturity, making them an important component of fixed-income investing. Diversification Reduces Concentration Risk One of the main advantages of foreign bonds is diversification. When a portfolio relies entirely on domestic bonds, it becomes highly exposed to ...
