This morning, I added shares in Vanguard Total International Bond ETF (BNDX) to my personal portfolio. The funds came from selling an almost equivalent amount of Vanguard Short-Term Bond ETF (BSV). With this move, international bonds now comprise roughly 20% of the total bond allocation in my retirement account and about 16% in my total portfolio, which includes my non-retirement account.
A little over a month ago, I wrote an article entitled International Bonds: Why In The World Would I Care? for the Seeking Alpha platform.
Here’s one of the pictures I shared in that article. This graphic from Vanguard suggests that a properly constructed portfolio involving both U.S. bonds and currency-hedged foreign bonds can have lower volatility than a portfolio with purely local-market bonds. Much more detail concerning the graphic can be found in the Seeking Alpha article. If this area is of interest to you I’d suggest taking a few minutes to read it.
I reflected for a little over a month after writing the Seeking Alpha article before taking any action with respect to the question of adding international bonds to my own portfolio. At the end of the day, both the concepts shared in that article as well as a desire for even greater diversification led to today’s decision.