Exchange Traded Funds (ETFs)

Seeking Market Exposure in Foreign Currencies

Investors seeking exposure to foreign currencies may be interested in learning about the Vanguard Total International Bond ETF (BNDX).

This exchange-traded fund (ETF) offers broad exposure to investment-grade bonds that are denominated in foreign currencies and hedged against currency fluctuations for U.S. investors. Conservative investors may appreciate that a majority of the fund’s investments are in sovereign bonds with AA ratings or better.

BNDX limits the impact of non-U.S. currency fluctuations on performance through the use of non-deliverable forward contracts. Transparency remains a concern for investors because Vanguard only publishes holdings on a monthly basis. However, the fund still offers a low cost and is the largest, most liquid fund in its segment. A newer fund entrant, iShares Core International Aggregate Bond ETF (IAGG), tracks a very similar index.

The Vanguard fund’s top sectors include government, corporate bond, agency/quasi-agency, covered bond and supranational. Its five top holdings are in agency bond (0.65%), France 1.0% 25-MAY-2027 (0.6%), Japan (0.55%), France 0.0% 25-MAY-2021 (0.51%) and Italy (0.48%).

Courtesy of Stockcharts.com

Recently, shares of the Vanguard Total International Bond ETF crossed above its 200-day moving average, changing hands as high as $54.62 per share.

Net assets are over $110 billion. The fund has 5,434 bonds, a daily volume of $71.75 million and an average spread of 0.02%. The expense ratio is low at 0.11%, which means that it is relatively inexpensive to hold in comparison to other exchange-traded funds.

Investors who are looking to add international diversity to their portfolio should consider this fund. The exchange-traded fund (ETF) employs hedging strategies to protect against uncertainty in exchange rates. It provides a convenient way to get broad exposure to non-U.S. dollar denominated investment-grade bonds and is passively managed, using index sampling.

As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.

Jim Woods

Jim Woods is a 20-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor. Jim is the editor of Intelligence Report, Investing Edge, the Bullseye Stock Trader, and The Deep Woods (formerly the Weekly ETF Report). His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. His articles have appeared on many leading financial websites, including StockInvestor.com, InvestorPlace.com, Main Street Investor, MarketWatch, Street Authority, Human Events and many others. Jim formerly worked with Investor’s Business Daily founder William J. O’Neil, helping to author training courses in the CANSLIM stock-picking methodology. The independent firm TipRanks rates Jim the No. 3 financial blogger in the world (out of more than 6,000). TipRanks calculates that, since 2012, he's made 361 successful recommendations out of 499 total, earning a success rate of 72% and a +15.3% average return per recommendation. He is known in professional and personal circles as “The Renaissance Man,” because his expertise includes such varied fields as composing and performing music; Western horsemanship, combat marksmanship, martial arts, auto racing and bodybuilding. Jim holds a BA in philosophy from the University of California, Los Angeles, and is a former U.S. Army paratrooper. A self-described “radical for capitalism,” he celebrates the virtue of making money from his Southern California horse ranch.