Bonds can play an important role in most investment portfolios, offering the potential for: income, diversification, price appreciation and steadier returns when compared to stocks. Investing across the vast global bond market can increase your opportunity to pursue these valuable benefits.
Global bond basics
Bonds are issued by governments all around the world and by companies in every industry sector. When you buy a bond, you are lending money to the issuer, who agrees to pay it back at a specific time, and in most cases, to make regular interest payments along the way. Many people associate bonds with U.S. Treasuries, however, they represent only about 13% of the worldwide total. Today’s global bond market is huge and is valued at more than $90 trillion.
Investing through a global bond fund
If investing in global bonds seems right for you, consider investing through an actively managed mutual fund. In a global bond fund, a professional portfolio manager will search for opportunities across markets, research and then select bonds on your behalf. Mutual funds also give you access to a wider range of bonds, providing an opportunity to increase return potential and diversify risk. A global bond fund that invests in a broad selection of bonds can provide a solid foundation for your portfolio.
Why go global?
For bond investors, the global marketplace offers a wider range of opportunities for growth, income and diversification.
- Growth: The world’s economy is changing, and many emerging market nations are growing faster than the developed world. In fact, taken together emerging markets make up about 36% of the global economy – a larger portion than the U.S.
- Income: Historically low interest rates in the U.S. have made it challenging for investors to achieve their income goals. Other countries may have more favorable conditions, including faster economic growth and higher interest rates.
- Diversification: Investing in a broadly diversified bond portfolio that includes a range of countries, industry sectors and currencies can reduce risk and help to preserve your assets. Keep in mind that diversification does not protect against loss.
GLOBAL ECONOMY IS CHANGING
Emerging markets now make a larger contribution than the U.S. to world GDP.