"New International Bond Fund Shows Promise"
- Taylor Larimore
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- Location: Miami FL
"New International Bond Fund Shows Promise"
Bogleheads:
Boglehead adviser, Allan Roth, has written this informative CBS MoneyWatch article, about Vanguard's soon-to-be available, foreign bond fund.
http://www.cbsnews.com/8301-505123_162- ... s-promise/
Best wishes.
Taylor
Boglehead adviser, Allan Roth, has written this informative CBS MoneyWatch article, about Vanguard's soon-to-be available, foreign bond fund.
http://www.cbsnews.com/8301-505123_162- ... s-promise/
Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
- JMacDonald
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Re: "New International Bond Fund Shows Promise"
Hi Taylor,
Thanks for the link. Allen Roth adds another point of view about this fund. I am still on the fence if I want it.
Thanks for the link. Allen Roth adds another point of view about this fund. I am still on the fence if I want it.
Best Wishes, |
Joe
- InvestorNewb
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Re: "New International Bond Fund Shows Promise"
I wonder how it will compare to BND...
My Portfolio: VTI [US], VXUS [Int'l], VNQ [REIT], VCN [Canada] (largest to smallest)
Re: "New International Bond Fund Shows Promise"
I'm curious about the level of withholding taxes, though.
Re: "New International Bond Fund Shows Promise"
InvestorNewb wrote:I wonder how it will compare to BND...
BND is just a share class of the Vanguard Total Bond Market Fund https://personal.vanguard.com/us/funds/ ... IntExt=INT. A US bond fund.
The difference is that this bond fund will track an international bond index.
Re: "New International Bond Fund Shows Promise"
Good to see an estimate of the hedging costs. My annual IPS review is in July, so I'll definitely take a close look at whether or not to include this. Excess cost, comparing Investor Shares only (including hedging) are 6-11 basis points over domestic TBM and Int-Term Index. Is the additional diversification worth it? Admiral Shares cost spreads are larger, but I can't purchase those in my employer account.
Retirement investing is a marathon.
Re: "New International Bond Fund Shows Promise"
By the time you add in the hedging cost, the expenses are not much lower than the international bond ETFs - BWZ, IGOV and ISHG - which all have an expense ratio of .35%.Kenneth Volpert, Vanguard head of the taxable bond group, confirmed that Vanguard would have hedging costs to buy forward contracts in currencies and must continually buy them to stay in a hedged position. He estimated those costs between 0.05 and 0.10 percent annually. That would put the total annual costs of the fund between 0.25 and 0.30 percent. That's still far below any other international bond fund.
The choice comes down to whether or not you want currency hedging. I want the exposure to foreigh currency risk/reward because it is one more diversifier.
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The most important thing you should know about me is that I am not an expert.
Re: "New International Bond Fund Shows Promise"
I believe the argument is that currency risk is an uncompensated risk - you are not provided any expected reward for your risk (well, perhaps the 5 basis points you are not paying for hedging contracts). It may provide some additional diversification, though. Whether or not that diversification can be better achieved using international equities is another matter.tc101 wrote: I want the exposure to foreigh currency risk/reward because it is one more diversifier.
Retirement investing is a marathon.
Re: "New International Bond Fund Shows Promise"
Has Larry made a comment about this fund yet? I keep looking for his name to pop up on one of these threads.
"Out of clutter, find simplicity” Albert Einstein
Re: "New International Bond Fund Shows Promise"
The risk is that the foreign currencies will go down in relation to the dollar. The reward is if the foreign currencies go up in relation to the dollar. Don't those balance each other out? Or am I missing something?I believe the argument is that currency risk is an uncompensated risk - you are not provided any expected reward for your risk
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The most important thing you should know about me is that I am not an expert.
- abuss368
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Re: "New International Bond Fund Shows Promise"
Hi Taylor,Taylor Larimore wrote:Bogleheads:
Boglehead adviser, Allan Roth, has written this informative CBS MoneyWatch article, about Vanguard's soon-to-be available, foreign bond fund.
http://www.cbsnews.com/8301-505123_162- ... s-promise/
Best wishes.
Taylor
Are you considering investing in this new bond fund?
I would be very interested in Mr. Bogle's thoughts on this new fund.
Best.
John C. Bogle: “Simplicity is the master key to financial success."
- Taylor Larimore
- Posts: 32842
- Joined: Tue Feb 27, 2007 7:09 pm
- Location: Miami FL
Re: "New International Bond Fund Shows Promise"
Abuss:Hi Taylor,
Are you considering investing in this new bond fund?
I would be very interested in Mr. Bogle's thoughts on this new fund.
I have not made up my mind about incorporating the new international bond fund into our portfolio. I see no reason to hurry with the decision.
Mr. Bogle likes to say: "Don't do something; just stand there."
Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
Re: "New International Bond Fund Shows Promise"
The hedging is purely symmetric. If there's inflation (the dollar goes down, other currencies up), then you want unhedged. If there's deflation (dollar up, other currencies down), then you want hedged. Typically people expect their international stock portfolio to counteract their domestic currency losing value. So having a bond portfolio do this as well is a bit duplicative and adds volatility with no additional expected return. I think that the vast majority of people are better off with the hedged option then the unhedged one.tc101 wrote:By the time you add in the hedging cost, the expenses are not much lower than the international bond ETFs - BWZ, IGOV and ISHG - which all have an expense ratio of .35%.Kenneth Volpert, Vanguard head of the taxable bond group, confirmed that Vanguard would have hedging costs to buy forward contracts in currencies and must continually buy them to stay in a hedged position. He estimated those costs between 0.05 and 0.10 percent annually. That would put the total annual costs of the fund between 0.25 and 0.30 percent. That's still far below any other international bond fund.
The choice comes down to whether or not you want currency hedging. I want the exposure to foreigh currency risk/reward because it is one more diversifier.
Re: "New International Bond Fund Shows Promise"
What does that have to do with whether it is compensated?tc101 wrote:The risk is that the foreign currencies will go down in relation to the dollar. The reward is if the foreign currencies go up in relation to the dollar. Don't those balance each other out? Or am I missing something?I believe the argument is that currency risk is an uncompensated risk - you are not provided any expected reward for your risk
Its like betting on coin flips.
"Index funds have a place in your portfolio, but you'll never beat the index with them." - Words of wisdom from a Fidelity rep
Re: "New International Bond Fund Shows Promise"
Maybe I am not clear on what exactly it means for risk to be compensated. I thought the possibiliy of a gain due to dollar up, other currencies down was a type of compensation, but maybe not.What does that have to do with whether it is compensated?
Its like betting on coin flips.
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The most important thing you should know about me is that I am not an expert.
Re: "New International Bond Fund Shows Promise"
It isn't compensation because it is exactly offset by the possibility of loss if the opposite occurs.tc101 wrote:Maybe I am not clear on what exactly it means for risk to be compensated. I thought the possibiliy of a gain due to dollar up, other currencies down was a type of compensation, but maybe not.What does that have to do with whether it is compensated?
Its like betting on coin flips.
Re: "New International Bond Fund Shows Promise"
I haven't seen anything by Larry yet but Rick posted something pretty neutral about it a few days agoJay69 wrote:Has Larry made a comment about this fund yet? I keep looking for his name to pop up on one of these threads.
Mike
- Archie Sinclair
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Re: "New International Bond Fund Shows Promise"
Exactly, if you don't think the likelihood of gain exceeds the likelihood of loss, it's just simple gambling. Like betting on red or black at a roulette table, or betting heads or tails.Akiva wrote:It isn't compensation because it is exactly offset by the possibility of loss if the opposite occurs.tc101 wrote:Maybe I am not clear on what exactly it means for risk to be compensated. I thought the possibiliy of a gain due to dollar up, other currencies down was a type of compensation, but maybe not.What does that have to do with whether it is compensated?
Its like betting on coin flips.