International Bonds

• International bonds are bonds that are not issued by a domestic entity. According to Christina Granville, former officer at Morgan Stanley and Alliance Capital, explains that international bonds could offer higher returns and more diversification options than bonds issued in the United States. Global bonds, or fixed-income securities, usually have a higher rate of return than United States fixed-income securities. From 1991 to 2007, global bond indexes had a higher annual rate of return than United States Treasuries, 7 percent versus 6 percent respectively. A bond investor would spread out risk within a portfolio by using international bonds. If a portfolio is solely based in U.S. bonds and other debt-securities and the interest rate increases, then all the U.S. bond holdings will be affected.
  
  

International Exchange-Traded Funds

• International exchange-traded funds invest in assets outside of the United States, such as Latin America, Europe or Asia. These exchange-traded funds may focus on a region (South Pacific) or a single country (Israel). Foreign exchange-traded funds tend to invest around an underlying index, although this practice differs from one fund manager to another. Those funds invested in strong economies can provide a strong diversification option by investing in hundreds of established global companies. International exchange-traded funds that invest in only one country may pose a higher risk. On the other hand, international exchange-traded funds can offer up more growth, because many global companies are growing at faster rates than domestic ones. These global funds have been popular among U.S. investors.
  
  

Currency Exchange-Traded Fund

• A currency exchange-traded fund invests in a currency or multiple currencies to replicate movements in the foreign exchange market. These funds are typically used by investors who wish to increase exposure to a foreign exchange market without entering the futures and forex markets. Exchange-traded funds are found easy to use and rather cost effective way to trade currencies. foreign currency exchange-traded funds most common currencies include the Canadian dollar, the Euro, British pound, and the Japanese Yen.
  
  

Emerging Market: BRIC Nations

• Emerging markets are those in developing countries and economies with a small operating history. Brazil, Russia, India, and China are collectively called the BRIC nations. In 2009, these nations accounted for the 25 percent of the world's GDP. These nations are rich in oil and other commodities, as well as increasing in manufacturing. For instance, India's economy is expected to grow six percent in 2010 opposed to Britian's four percent decline. Investors turn to emerging markets due to the potential increase growth within these economies.
  
  

Warning

• International investments carry risk as any other investment. Emerging markets carry risk due to their underdeveloped market, which can mean lack of transparency and poor regulatory system. Furthermore, these economies can be affected by political and governmental risk. Some investments may even lack liquidity. International debt-securities can be a great hedge against a weak dollar. However, foreign bonds react negatively when the U.S. dollar is on the upside. Foreign bonds in underdeveloped countries may pose more default risk due to political strife or unstable monetary policies.