Monday, July 25, 2005

Jet-Set Debt

Morningstar analyst Arijit Dutta advises stateside investors not to stray too far from home in their bond portfolio. "You should start with a core bond holding," he says, "something domestic and investment grade."

But with more than half the world's debt issued outside the U.S., there are plenty of ways to wager on overseas fixed income and make good money doing it. The tricky part is figuring out how and where. Forget about buying foreign bonds themselves. Most people can't cope with the time, taxes and transaction costs involved.

Low-cost bond funds get rid of those problems but don't solve a big one:allocation. These funds tend to either stay out of the U.S. market altogether or keep a majority of their holdings--usually 60%--overseas. You can tack on one of these to your core domestic portfolio, but how much is too much, especially as global economic conditions shift?

Full story (reg. required) at