investment challenge

[cincincyreds]

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So here is my investment challenge.

I want someone to come up with an investment strategy starting next year with the fiscal cliff coming that is guaranteed to at least match CPI inflation after taxes. What do you guys or gals suggest?

Top tax rates going now to 39.6% versus 35%. Also add in an extra 0.9% medicare surcharge on your income and 3.8% on your investment income.

 

[Precedex]

I think the only thing that meets those criteria are I-Bonds which grow tax-deferred and are inflation-adjusted. GOOD LUCK. I would still invest most of your savings in US equity!

 

[pgg]

Live beneath your means, save as much as you can.

Be passive, low cost, diverse, tax efficient, stick with a simple good plan, quit worrying, marvel at the market timers who think they know what'll happen next week or month or year.

Solved.

If you want to stress out over it and very likely underperform, you can pick stocks and jump in and out, watch financial TV, and ask doctors for investment advice. Once upon a time I did that.

 

[countingdays]

Municipal bond funds, physical gold, real estate, TIPS.
I favor munis since they don't require management like real estate and they don't require tax evasion or risk theft like physical gold.

 

[BLADEMDA]

PGG and Doze are correct. I've tried it all over the last 2 decades and my backtesting analysis shows I would have performed better using the 'Doze' method than any other. But, I'd go even simpler than him and use ETFs for the majority of my taxable investments with only a once per year reblancing time frame. Even then I don't think rebalacing needs to be as tight as he does in terms of performance as certain investment classes tend to outperform for years at a time.

Equity ETFs are in general more tax efficient than mutual funds with lower costs/expenses. I use Morningstar.com and ETFDB for investment advice along with some others.

But, I still like trading individual stocks as part of my portfolio even though that side of the equation is shrinking as my overall nest egg grows. Eventually, I will only trade companies in the Russell 1000 whose shares are significantly discounted to fair value with the understanding these stocks will need 2-3 years to turn around. My value plays will make up less than 10% of my overall portfolio.

Taxable Bond Funds, Real estate Funds/Reits, high turn over mutual funds are better utilized in your IRA/401K.

This week I will be selling quite a lot of stock and mutual funds as I transition into ETFs.

 

[deleted126335]

These are challenging times to invest. Right now, the risk free rate of return will give you a negative return after taxes and inflation. There is nowhere to get a guaranteed postive real return.
Precedx mentioned IBonds. I have been buying the max for years. They have a fixed rate component and a variable rate component. The variable rate is based on the CPI. The fixed rate right now is 0.0%. Thus they will pay the CPI (tax deferred) and state tax free when redeemed. Still a negative real return after taxes.
IMO they are the closest thing to a risk free rate. Every other asset class mentioned (and those that haven't been mentioned) has greater risk. 30 year TIPs have a positive real yield. less than 30 years out the yields are negative. Still negative rate of return after taxes even on the 30 year.

Future expected returns of stocks (all asset classes) are lower than average going forward. Future epected returns of Bonds are much lower than average going forward. Future expected returns of stock compared to bonds are higher than average going forward.

In answer to your question, I bonds, and ( EE bonds if and only if you can hold for the full 20 years) are the closest thing that you can find to a positive RISK FREE rate of return.

Expected but not guaranteed real rates of return exist in multiple equity asset classes especially Europe, Emerging markets and maybe commodities.

Suc*s to be a retiree or soon to be a retiree living off savings and investments.

 

[BLADEMDA]

http://etfdb.com/

Don't be tempted by flashy or trendy mutual funds. Build a cheap, tax efficient ETF model for equities, real estate, etc.

For Bond investments I prerfer quality, low cost mutual funds because ETFs lose tax efficiency on the bond side. That said, there are quality BOND ETFs available.

Like Doze said think about a portion of your investments in Emerging Markets, Commodities, etc.
I have Gold ETF, Silver ETF, Gold mining ETF, Physical Gold and Physical Silver. I also own a few commodity based ETFs as part of my portfolio.

I sleep well at night knowing Obama can't get his hands on my Gold Coins or tax them every year. As far as the IRS is concrned those Physical coins are invisible.

 

[BLADEMDA]

Real U.S. Currency!

 

[BLADEMDA]

 

[cincincyreds]

These are challenging times to invest. Right now, the risk free rate of return will give you a negative return after taxes and inflation. There is nowhere to get a guaranteed postive real return.
Precedx mentioned IBonds. I have been buying the max for years. They have a fixed rate component and a variable rate component. The variable rate is based on the CPI. The fixed rate right now is 0.0%. Thus they will pay the CPI (tax deferred) and state tax free when redeemed. Still a negative real return after taxes.
IMO they are the closest thing to a risk free rate. Every other asset class mentioned (and those that haven't been mentioned) has greater risk. 30 year TIPs have a positive real yield. less than 30 years out the yields are negative. Still negative rate of return after taxes even on the 30 year.

Future expected returns of stocks (all asset classes) are lower than average going forward. Future epected returns of Bonds are much lower than average going forward. Future expected returns of stock compared to bonds are higher than average going forward.

In answer to your question, I bonds, and ( EE bonds if and only if you can hold for the full 20 years) are the closest thing that you can find to a positive RISK FREE rate of return.

Expected but not guaranteed real rates of return exist in multiple equity asset classes especially Europe, Emerging markets and maybe commodities.

Suc*s to be a retiree or soon to be a retiree living off savings and investments.

-I bonds I've bought for the past 12 years or so. My older ones were like 3.6% fixed plus inflation. I was laughed at when I bought 60,000 of that stuff that year, but he who laughs last laughs best. I even bought on a credit card at the time off treausrydirect, so made a killing on that. Now the limit is $10k/year.

-30 year TIPS : Really aweful now. The real yield is about 2% on the secondary market. I have a bunch of this stuff when it was yield a real rate of 3%, so I could sell those bonds for a big premium today. I think if you go below 27 years on the secondary market you will get a negative real yield and that is before taxes. The next primary auction for this will be February 2013. I'm gonna assume a really low real yield, maybe .2%? As long as the real yield is positive, this will be my roth ira conversion money, which will be $5500 next year.

-EE bonds : - Another interesting investment. If you hold for 20 years, you are guaranteed to double your money. So in essence you will get 3.53% tax deferred interest. Intersting put option of inflation really takes off since you could sell after one year. You can only buy $10,000 in a year of this.


-Gold : Not sure what gold does, but just sold a bunch of my gold coins which I was given as a gift when I graduated medical school. Pretty poor performance this year. I think I sold each coin for $1800, but today worth $1700.

-Stock Market : Pretty poor performance since 2000. About 2%/year after fees, which is less than the rate of inflation. So a 12 year peroid of holding the s and p 500 doesn't guarantee you beat CPI inflation.

 

[BLADEMDA]

Platinum is cheap right now and a great long term investment. You can get an ounce of Platinum for less than an ounce of Gold.

 

[BLADEMDA]

-I bonds I've bought for the past 12 years or so. My older ones were like 3.6% fixed plus inflation. I was laughed at when I bought 60,000 of that stuff that year, but he who laughs last laughs best. I even bought on a credit card at the time off treausrydirect, so made a killing on that. Now the limit is $10k/year.

-30 year TIPS : Really aweful now. The real yield is about 2% on the secondary market. I have a bunch of this stuff when it was yield a real rate of 3%, so I could sell those bonds for a big premium today. I think if you go below 27 years on the secondary market you will get a negative real yield and that is before taxes. The next primary auction for this will be February 2013. I'm gonna assume a really low real yield, maybe .2%? As long as the real yield is positive, this will be my roth ira conversion money, which will be $5500 next year.

-EE bonds : - Another interesting investment. If you hold for 20 years, you are guaranteed to double your money. So in essence you will get 3.53% tax deferred interest. Intersting put option of inflation really takes off since you could sell after one year. You can only buy $10,000 in a year of this.


-Gold : Not sure what gold does, but just sold a bunch of my gold coins which I was given as a gift when I graduated medical school. Pretty poor performance this year. I think I sold each coin for $1800, but today worth $1700.

-Stock Market : Pretty poor performance since 2000. About 2%/year after fees, which is less than the rate of inflation. So a 12 year peroid of holding the s and p 500 doesn't guarantee you beat CPI inflation.

Emerging Markets and Emerging Market Bonds. Those are likely to outperform over the next ten years.

Gold isn't an investment rather a long term hedge against currency debasement.

You timed the Bond Market perfectly and made a killing. Congrads. I wouldn't be betting big on bonds going forward in 2013 unless they were Emerging Market bonds; high yield bonds are correlated with equities and have also outperformed the last few years.

 

[BLADEMDA]

http://etfdb.com/etfdb-category/emerging-markets-bonds/



PCY ETF 5 year Return: 64.51%

 

[deleted126335]

-I bonds I've bought for the past 12 years or so. My older ones were like 3.6% fixed plus inflation. I was laughed at when I bought 60,000 of that stuff that year, but he who laughs last laughs best. I even bought on a credit card at the time off treausrydirect, so made a killing on that. Now the limit is $10k/year.

-30 year TIPS : Really aweful now. The real yield is about 2% on the secondary market. I have a bunch of this stuff when it was yield a real rate of 3%, so I could sell those bonds for a big premium today. I think if you go below 27 years on the secondary market you will get a negative real yield and that is before taxes. The next primary auction for this will be February 2013. I'm gonna assume a really low real yield, maybe .2%? As long as the real yield is positive, this will be my roth ira conversion money, which will be $5500 next year.

-EE bonds : - Another interesting investment. If you hold for 20 years, you are guaranteed to double your money. So in essence you will get 3.53% tax deferred interest. Intersting put option of inflation really takes off since you could sell after one year. You can only buy $10,000 in a year of this.


-Gold : Not sure what gold does, but just sold a bunch of my gold coins which I was given as a gift when I graduated medical school. Pretty poor performance this year. I think I sold each coin for $1800, but today worth $1700.

-Stock Market : Pretty poor performance since 2000. About 2%/year after fees, which is less than the rate of inflation. So a 12 year peroid of holding the s and p 500 doesn't guarantee you beat CPI inflation.

The key word is "expected" not guaranteed. If there were no risk, stocks would be bid up in price so there expected return were the same as treasury bonds. Given how murderously expensive bonds are.

TIPS do not have real yiels of 2% on the secondary market. The US Treasury market is the most liquid market that exists. Spreads are nowhere that big. Real yields are in the neighborhood of 0.2%.

Roth IRA Money should be the tax inefficent asset class with the highest expected return going forward. These should be the last dollars that a retiree spends and ideally the first dollars to be left to one's heirs. My Roth IRA is 100% stocks, split equally between emerging markets, US small cap value, and international small cap value.

 

[deleted126335]

http://etfdb.com/etfdb-category/emerging-markets-bonds/



PCY ETF 5 year Return: 64.51%

I guarantee that there is an ETF out there that will do as well in the next five years. I just don't know what it is. Do you?
🙂

 

[BLADEMDA]

The key word is "expected" not guaranteed. If there were no risk, stocks would be bid up in price so there expected return were the same as treasury bonds. Given how murderously expensive bonds are.

TIPS do not have real yiels of 2% on the secondary market. The US Treasury market is the most liquid market that exists. Spreads are nowhere that big. Real yields are in the neighborhood of 0.2%.

Doze I have followed your advice and put a chunck on money into Vanguard Limited Term tax exempt. But, I expect that fund to underperform vs inflation.

For my real inflation beating returns I have International Bond Funds/Emerging Bond Funds, Emerging market Funds and Commodities.

Now is great time to buy Natural Gas companies CHEAPLY or Coal companies (riskier play but very cheap) or Steel Companies (dirt Cheap) or Fertilizer stocks (cheap).

These are cyclical companies who are out of favor with the street but long term look excellent.

The world will need more food over the next 20 years and this means we need machines and fertilizers to grow the food.

 

[BLADEMDA]

I guarantee that there is an ETF out there that will do as well in the next five years. I just don't know what it is. Do you?
🙂

Bond Funds are NOT about great returns but decent, inflation beating returns. Emerging Bond Funds still look good compared to the U.S.

 

[BLADEMDA]

http://etfdb.com/etfdb-category/commodity-producers-equities/

I like MOO, HAP and GDX. I own them as part of a diversified portfolio. HAP and MOO are solid picks to beat inflation over the long term.



MOO Top Ten Holdings
Monsanto Company (MON): 7.70%
Syngenta AG (SYENF): 7.53%
Potash Corporation of Saskatchewan, Inc. (POT): 7.09%
Deere & Co (DE): 7.00%
JSC Uralkali GDR (URALL): 5.80%
Agrium Inc (AGU): 4.54%
Archer-Daniels Midland Company (ADM): 4.42%
Wilmar International Ltd (F34): 4.33%
BRF - Brasil Foods SA ADR (BRFS): 4.31%
Mosaic Co (MOS): 4.19%

 

[BLADEMDA]

HAP Top Ten Holdings
Exxon Mobil Corporation (XOM): 6.00%
Monsanto Company (MON): 4.70%
Syngenta AG (SYENF): 3.69%
Potash Corporation of Saskatchewan, Inc. (POT): 3.54%
Deere & Co (DE): 3.45%
Chevron Corp (CVX): 3.10%
BHP Billiton Ltd (BHPLF): 2.34%
BP PLC (BPAQF): 1.93%
Archer-Daniels Midland Company (ADM): 1.81%
Agrium Inc (AGU): 1.72%

 

[cincincyreds]

Platinum is cheap right now and a great long term investment. You can get an ounce of Platinum for less than an ounce of Gold.

What about palladium? Isn't that metal used in catalytic converters? I think platinum is also used. So wouldn't you say palladium and platinum would be better than gold because they can actually be used for something?

Just using some logic. I've always had a hard time grappling owning a lot of gold. Kind of makes me think of my ancestors in 1945 Germany.

 

[BLADEMDA]

What about palladium? Isn't that metal used in catalytic converters? I think platinum is also used. So wouldn't you say palladium and platinum would be better than gold because they can actually be used for something?

Just using some logic. I've always had a hard time grappling owning a lot of gold. Kind of makes me think of my ancestors in 1945 Germany.

Gold is viewed as currency and risk trade. Platinum and Palladium are viewed as industrial metals more than currency. I like Platinum because it can be a currency and is used as an industrail metal. This can be said for Silver.

Platinum is cheap right now relative to Gold due to the weak economy. If the economy picks up Platinum will do better than Gold. If we don't address our national debt then Gold is the preferred metal.

 

[BLADEMDA]

Despite taxes going way up I still will have Domestic Dividend paying ETFs as a major part of my portfolio. I don't think a 2-3% dividend yield will hurt me that much in terms of taxes but will preserve my wealth better when the market drops like a rock.

My Core position Going Forward is VIG ETF and VONE (commission free from Vanguard).

I think VIG or DVY are solid ETF holdings for 2013 and beyond. VIG is commission free from Vanguard and you can buy on the dips like any stock or ETF.

Another good ETF is PRF.

If you want to beat inflation then equity exposure is key to your portfolio. Quality Dividend paying stocks mitigate the downside risk.

 

[BLADEMDA]

We don't want to pay more taxes, and most likely you don't want to either; and the extra bite out of dividend income is unpleasant. However, in light of these facts, we don't see the market overall reacting as drastically to the change in dividend tax rates as the 15% to 43.8% (basically 3X) change to the top rate suggests on the surface.

A minority of all dividend income is earned by the rich. A small portion the total income of the rich comes from dividends. Dividends are less than 1/2 of the investment income of the rich. And, the rich don't have many other places to go to find yield that provides the combinations of income growth, liquidity and relative stability and safety as high quality, brand dominant companies with good dividend coverage and long histories of paying and increasing dividends.

What do you think?

FOUR LEADING DIVIDEND ETFs

S&P Dividend Aristocrats (SDY)
DJ Select Dividends (DVY)
Vanguard High Dividend Yield (VYM)
Vanguard Dividend Appreciation (VIG

 

[BLADEMDA]

For example,

Let's assume a 2.3% yield on VIG. Amount invested: 100,000

Dividend: $2300
Taxes owed: 44% which is $1012

Instead of paying a fund advisor or a CFA to run my money I pay Obama $2300. Capital Gains are minimal to zero on ETFs but I do have to pay the $1012 (worst case scenario).

I get growth from my underlying stocks and reinvest the dividend of $2300. The following year I may owe Obama $1200 on this investment if VIG goes up in value.

(VIG only charges an annual expense of 0.13% one of the lowest in the industry).

 

[Mman]

Bond Funds are NOT about great returns but decent, inflation beating returns. Emerging Bond Funds still look good compared to the U.S.

The only potential problem with buying bonds (or through bond funds) from a foreign company or country is that as a noncitizen you likely have no legal protection if they default. They end up being riskier than bonds from American corporations.

 

[deleted126335]

The only potential problem with buying bonds (or through bond funds) from a foreign company or country is that as a noncitizen you likely have no legal protection if they default. They end up being riskier than bonds from American corporations.

Not sure a bond cares who owns it, be they a citizen or non-citizen. Sovereign debt of places like Germany, Canada, Australia, UK, and a few others are as safe or safer than any US company IMO. Of course there is currency risk.
BTW last time I checked there were 4 companies whose debt was rated higher than the debt of the US Treasury. I think the bond rating agencies are full of **** on that one.

 

[BLADEMDA]

The only potential problem with buying bonds (or through bond funds) from a foreign company or country is that as a noncitizen you likely have no legal protection if they default. They end up being riskier than bonds from American corporations.

That's correct which is why the yield needs to be higher and I buy from a well respected fund company like Pimco or Fidelity.

 

[BLADEMDA]

Not sure a bond cares who owns it, be they a citizen or non-citizen. Sovereign debt of places like Germany, Canada, Australia, UK, and a few others are as safe or safer than any US company IMO. Of course there is currency risk.
BTW last time I checked there were 4 companies whose debt was rated higher than the debt of the US Treasury. I think the bond rating agencies are full of **** on that one.

In fact I think my Australian bonds are safer than my US bonds

 

[deleted126335]

Doze I have followed your advice and put a chunck on money into Vanguard Limited Term tax exempt. But, I expect that fund to underperform vs inflation.

For my real inflation beating returns I have International Bond Funds/Emerging Bond Funds, Emerging market Funds and Commodities.

Now is great time to buy Natural Gas companies CHEAPLY or Coal companies (riskier play but very cheap) or Steel Companies (dirt Cheap) or Fertilizer stocks (cheap).

These are cyclical companies who are out of favor with the street but long term look excellent.

The world will need more food over the next 20 years and this means we need machines and fertilizers to grow the food.

Vang limited tax exempt is my choice for safe money in a taxable account. It is my single biggest holding- although I strongly believe that the dollars allocated to this investment will have a negative return after taxes. I tolerate this because of my views for the function of fixed income in a portfolio. I don't use Gold although I think that there are multiple reasonable strategies to use Gold in a portfolio, if you have the stomach and the discipline to fathfully rebalance

Look at all your holdings (taxable, tax deferred, tax free) as a single portfolio. Not as individual separate accounts.

 

[doctor712]

Gold is viewed as currency and risk trade. Platinum and Palladium are viewed as industrial metals more than currency. I like Platinum because it can be a currency and is used as an industrail metal. This can be said for Silver.

Platinum is cheap right now relative to Gold due to the weak economy. If the economy picks up Platinum will do better than Gold. If we don't address our national debt then Gold is the preferred metal.

Pardon me, everyone, while I contact my local Gold broker... 🙄

D712

 

[BLADEMDA]

Vang limited tax exempt is my choice for safe money in a taxable account. It is my single biggest holding- although I strongly believe that the dollars allocated to this investment will have a negative return after taxes. I tolerate this because of my views for the function of fixed income in a portfolio. I don't use Gold although I think that there are multiple reasonable strategies to use Gold in a portfolio, if you have the stomach and the discipline to fathfully rebalance

Look at all your holdings (taxable, tax deferred, tax free) as a single portfolio. Not as individual separate accounts.

I own my gold in three ways:

1. Fixed bullion coins. (No trading here or rebalancing)
2. GLD ETF. ( easy to trade and rebalance)
3. Gold miner ETF

My precious metals make up 10 percent of my portfolio but I'm not adding to the position.
I'll keep my coins but sell the GLD ETF when Gold hits $2500. I'll also sell half my gold mining stocks at $2500 an ounce. I would consider unloading half my coins at $3,000 an ounce.

 

[BLADEMDA]

Pardon me, everyone, while I contact my local Gold broker... 🙄

D712

These days your local online broker on,y charges $60 per coin over the spot price when you buy and some even give you back spot plus $25-30 per coin when you sell. So, transactions costs are only $30 per 1 ounce coin and the IRS is not aware of your trading

 

[BLADEMDA]

Unlike Doze I like to swing for the fences as part of my portfolio. That's why I bought Lowes 24 months ago and am up 100 percent. Ditto for several other unloved stocks.

These days Apache is on my short list. I think the stock has room to double over the next 2 years. A riskier double is ultra petroleum.

I like steel producers for a double and the best coal producer for a 50 percent gain.

I limit my speculation stocks to no more than 10 percent of my portfolio and these days I'm likely to drop to 5 percent as the work involved in watching/selling these stocks is significant.

As my portfolio grows I'm less likely to buy individual stocks but every now and then one does pop up

 

[BLADEMDA]

Doze and Obama gave me a wake up call. For years I invested in mutual funds with an average expense of 0.8 percent and yearly capital gains. No more.

Even though taxes are going way up by switching to low cost ETFs which are more tax efficient I can mitigate the increased Obama taxes. I expect my costs in my taxable account to go up just slightly in 2013 vs 2012 by switching to ETF funds, even dividend paying ETF funds.

For the long term I'm going with ETFs in my taxable account.

 

[BLADEMDA]

Demand for gold coins in the US has soared since the presidential election, as small investors fret about the lack of action to address America's ballooning debt.

The US Mint's sales of American Eagles, one of the most popular gold coins, leapt 131 percent in November, hitting their highest level in more than two years. The Royal Canadian Mint also had its strongest month of sales this year.

Terry Hanlon, president of metals at Dillon Gage, one of the largest bullion dealers in the country, said sales had risen sharply "within a day or two" of the election.

"You've got a lot of people who are very worried about the economy. With the election they saw that nothing was going to change," he said.

While coins are a small part of the overall gold market, the jump in sales highlights gold's role as the favored investment of disenchanted Americans. The political gridlock in Washington and the prospect of further quantitative easing when the Federal Reserve's "operation twist" expires at the end of this year have fuelled demand for precious metals among small investors.

"They don't believe in Uncle Sam any more," said the head of precious metals at a large bank.

Tobina Kahn, who runs a jewelery dealership in Chicago, said: "Obama did me a favor in some ways. Now people are buying gold and jewels not because they like them but because of fear. They're trying to protect their wealth."

Despite the increase in coin purchases, the gold market has struggled for momentum in recent weeks. Prices last week dropped below $1,685 a troy ounce for the first time in a month and some hedge funds have begun to lose patience with the precious metal's lacklustre performance.

"The institutional investors cut back and are more on the sidelines now," said James Steel, head of precious metals strategy at HSBC in New York. "But the coin market is dominated by retail investors and the man on the street is still pretty committed to gold."

The jump in sales of American Eagles was amplified by a rush among dealers to stock up before the end of the year when the US Mint switches production from "2012" to "2013" coins.

But dealers said the rise in sales largely reflected a big increase in demand. Mr Hanlon said that Dillon Gage had record sales volumes on several days in November and that overall sales had risen 32 per cent by volume from October's levels.

Other mints also witnessed a buying spree. "November was a very strong month for gold Maple Leaf sales," said Chris Carkner, head of bullion sales at the Royal Canadian Mint, whose Maple Leaf coins are one of the world's top gold coins by circulation along with American Eagles.

 

[Mman]

Not sure a bond cares who owns it, be they a citizen or non-citizen. Sovereign debt of places like Germany, Canada, Australia, UK, and a few others are as safe or safer than any US company IMO. Of course there is currency risk.
BTW last time I checked there were 4 companies whose debt was rated higher than the debt of the US Treasury. I think the bond rating agencies are full of **** on that one.

A bond doesn't care who owns it, but if the entity you are buying the bond in goes bankrupt you have little recourse if you are a noncitizen in that country.

For example, if you buy a bond of an American company and that company goes bankrupt, the bond holders have first dibs on any cash generated from the sell off of assets of the company while stock holders come in afterwards. If you bought a similar bond of a company in some other country, as a noncitizen you likely would have no rights to claim anything in the restructuring/sell off of the company until the citizen bond and stock holders were first satisfied.

Rules vary from country to country, but in general you have less legal protection with a foreign bond compared to a domestic bond. That's why you should require a higher rate of return for the similar investment.

 

[deleted126335]

A bond doesn't care who owns it, but if the entity you are buying the bond in goes bankrupt you have little recourse if you are a noncitizen in that country.

For example, if you buy a bond of an American company and that company goes bankrupt, the bond holders have first dibs on any cash generated from the sell off of assets of the company while stock holders come in afterwards. If you bought a similar bond of a company in some other country, as a noncitizen you likely would have no rights to claim anything in the restructuring/sell off of the company until the citizen bond and stock holders were first satisfied.

Rules vary from country to country, but in general you have less legal protection with a foreign bond compared to a domestic bond. That's why you should require a higher rate of return for the similar investment.

Fair point if you investing in lower quality debt, but I use bonds for safety. I have a chunk of change in a currency hedged global bond fund that holds only AA or above. Holdings include sovereign debt of Austria, France, Finland and the UK and companies like Toyota. If stuff like this is defaulting we will be in a world of shi t.

 

[BLADEMDA]

Fair point if you investing in lower quality debt, but I use bonds for safety. I have a chunk of change in a currency hedged global bond fund that holds only AA or above. Holdings include sovereign debt of Austria, France, Finland and the UK and companies like Toyota. If stuff like this is defaulting we will be in a world of shi t.

I use Bond Mutual Funds here. ETFs are a bit cheaper but I get PIMCO or Fidelity Bond managers at a small cost so I worry less. ETFS are not any more tax efficient than Bond Mutual Funds so I keep most bonds in my IRA/401K.

 

[doctor712]

These days your local online broker on,y charges $60 per coin over the spot price when you buy and some even give you back spot plus $25-30 per coin when you sell. So, transactions costs are only $30 per 1 ounce coin and the IRS is not aware of your trading

Good info, thanks.

D712

 

[Mman]

Fair point if you investing in lower quality debt, but I use bonds for safety. I have a chunk of change in a currency hedged global bond fund that holds only AA or above. Holdings include sovereign debt of Austria, France, Finland and the UK and companies like Toyota. If stuff like this is defaulting we will be in a world of shi t.

Oh I understand, but the point of most people investing in bonds is so that if we are in a world of s%^& that their investment will be safe. The safety of bonds is in the fact that you have a claim to a company's assets before stockholders do. When it's in another country, that safety net may be gone.

Not everybody is aware of this.