Shooting for extra income? It can pay to venture offshore. Yields on bonds issued by foreign governments and companies often beat comparable U.S. rates. Moreover, central banks in Europe and Japan recently cut interest rates, while the Federal Reserve has embarked, gingerly, on the opposite path. Such divergences can make foreign bonds a better bet than U.S. bonds, which stand to lose value if rates continue to increase at home.
Earnings for All
- Bank Accounts: 1%-4%
- Municipal Bonds: 1%-3%
- Investment-Grade Bonds: 3%-5%
- Real-Estate Investment Trusts: 2%-6%
- Preferred Stocks: 4%-7%
- Closed-End Funds: 5%-11%
- High-Yield Bonds: 6%-8%
- Master Limited Partnerships: 5%-11%
Risks to your money. Swings in foreign currencies may be tough to overcome. If the dollar were to resume its ascent, bonds based in other currencies would likely slump. Moreover, even dollar-based foreign debt could slide if local economic conditions decline or interest rates climb. Companies and governments may also have a tougher time repaying their debts if the dollar gains value (making their local currencies worth less and hiking their interest costs).
Hire a pro. T. Rowe Price Global Multi-Sector Bond (PRSNX, 3.7%) holds half of its assets in foreign bonds, ranging from Canadian government debt to securities issued by companies such as Deutsche Bank and Schlumberger. At last word, 47% of the fund’s assets carried junk ratings or were unrated. That bumps up its yield but could magnify losses. Kiplinger 25 member Fidelity New Markets Income (FNMIX, 6.4%) keeps nearly all its assets in dollar-based securities, with 60% at last report in government bonds and 30% in corporate debt (the rest is in cash and stock ETFs). Also compelling is iShares J.P. Morgan USD Emerging Bond ETF (EMB, $110, 4.8%), which mainly holds government bonds issued in dollars. Emerging markets are highly volatile, though, and this fund, a member of the Kiplinger ETF 20, could hit some lengthy rough patches. (All prices and returns are as of March 31.)
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Next: Preferred Stocks to Earn 4% - 7%
-
Stocks Slide to Start September: Stock Market TodaySeasonal trends suggest tough times for the stock market as we round into the end of the third quarter.
-
Here's What You'd Have If You Invested $1,000 Into Sherwin-Williams 20 Years AgoSherwin-Williams stock has clobbered the broader market by a wide margin for a long time.
-
Can President Trump Fire Fed Governor Lisa Cook?Markets hate uncertainty, especially when it comes to monetary policy and interest rates, and questions about the Fed are compounding.
-
Powell Signals Rate Cuts in His Jackson Hole Speech. Here's What Wall Street is SayingIn his speech at the Jackson Hole symposium Friday, Fed Chair Jerome Powell said current conditions "may warrant" rate cuts.
-
Trump-Era Regulations Will Broaden Access to CryptoThe Kiplinger Letter The president wants to make the U.S. the leader in digital assets.
-
July CPI Report Boosts Rate-Cut Odds: What the Experts SayThe July CPI report shows that tariffs are having a slight impact on inflation, though not enough to keep the Fed from cutting interest rates.
-
How Big Will the Fed Rate Cut Be This Fall?A dismal July jobs report has lifted expectations for fall rate cuts. How low could the fed funds rate be by year's end?
-
July Jobs Report Renews Rate-Cut Hopes: What the Experts Are SayingThe July jobs report shows weakening in the labor market and lifts expectations for a September rate cut.
-
Should You Buy These ETFs Before the Fed Cuts Rates?The Fed is likely to lower interest rates this fall, and tactical investors might want to look closer at these ETFs before rate cuts resume.
-
July Fed Meeting: Updates and CommentaryThe July Fed meeting came and went, with Fed Chair Powell saying little about a September rate cut and President Trump.
