3 Options for Investing in International Bonds

Investing in international bonds is a way that you can create some diversification and steady income for yourself. When you choose to invest in this type of security, there are three different ways that you can do so.

Individual Bonds

One way that you can invest in international bonds is to individually purchase the bonds yourself. This approach is the most direct way for you to get involved in the market. With this process, you are going to deal with some issues that will not be a factor with other methods of investment. For example, you are going to have to come up with a larger initial investment than you would with other methods of buying bonds. You are going to have to open an account with a bond broker. Most of the time, they are going to require you to invest at least $5000 in order to open an account. When you work with a bond broker, you are also going to have to pay some type of a commission to them every time that you buy a bond. This type of direct investment will have some time constraints with it as well. You are going to need to hold the bonds until maturity in order to get the most out of your investment. This makes it a very long-term type of investment.

International Mutual Funds

Another option that you have if you want to get involved in international bonds is an international mutual fund. By investing in mutual funds that buy international bonds, you will be able to create a diversified portfolio. Mutual funds purchase a large number of international bonds as part of their portfolio. This means that you will be a partial owner of each one of these bonds. The mutual fund will provide you with regular interest payments from all of the different bonds that they own. When you want to purchase shares in a mutual fund of this type, you will put in your order at some point in the trading day. Then, at the end of the trading day, the prices of the mutual fund shares will be calculated, and your transaction will be processed. Because of this, you will not really know how much you are going to have to pay for your shares until the order is processed. When you invest in a mutual fund, you may have to pay a sales charge, and there will be other fees and expenses as well.

International Exchange-Traded Funds

The last option that you have is the international exchange-traded fund. This is very similar to a mutual fund except that you will be able to buy and sell shares at any point throughout the trading day. As long as the exchange is open, you can buy and sell. You will have to pay some type of a transaction fee when you make purchases or sell your shares.

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