Are bonds part of US allocation? (living overseas)

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FlyingMoose
Posts: 409
Joined: Wed Mar 04, 2009 10:48 pm

Are bonds part of US allocation? (living overseas)

Post by FlyingMoose » Tue Jun 25, 2019 9:19 pm

I don't live in the US but all of my investments are in the US. I live in the Philippines and my expenses are in Philippine Pesos (PHP).

My investment is currently 80% Total World and 20% Total Bond. I'm going to start moving more toward bond on a glide path as I get older.

What I was thinking, though, is that currently the stock portion of my portfolio is about half US and half international, which I'm happy with. The bond portion, though, is all in US dollars. Even the International Bond fund offered by Vanguard is hedged back into US dollars.

Since I've lived here, I've gone from getting about 48 PHP per dollar to getting about 52. This has been nice because my spending power increased, but in the recent past it has been down to only 42 per dollar from a high in the 80's, so spending power was basically cut in half. I'm wondering what I can do if this happens again.

One idea is TIPS, since if the dollar gets cheaper against foreign currency, it would likely be because of inflation, and the TIPS would help with that, but there's no guarantee that the value of the dollar is linked to inflation. Another is short bonds, again because interest rates may reflect the value of the dollar.

I'm also considering gold since it's considered to be independent of the currency, and contrary to popular opinion, it actually does earn a return through rebalancing. However, it includes volatility that may be worse than the value of the peso vs. the dollar.

I don't really want to hold too much in the local currency because a bank account pays very little interest and the depositor insurance (PDIC instead of FDIC) only protects about $10,000 (and banks around here have been known to fail).

I'd be interested to hear any ideas about protecting myself if the value of the dollar goes down...

Beensabu
Posts: 237
Joined: Sun Aug 14, 2016 3:22 pm

Re: Are bonds part of US allocation? (living overseas)

Post by Beensabu » Wed Jul 10, 2019 9:16 pm

Are unhedged international / global bonds not an option?
"The only thing that makes life possible is permanent, intolerable uncertainty; not knowing what comes next."

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