What are International Bonds?

Many investors utilize international bonds as part of their investment portfolio. International bonds are a debt instrument that are offered by foreign corporations. When a company needs to raise money for business purposes, they can offer bonds as a way to increase cash flow. As an investor, you can purchase these bonds. You give the company a certain amount of cash for the bond and then they pay you a specified rate of return over the life of the bond. Then at the end of the term of the bond, you cash in the bond certificate and get your entire investment back. 

Risks of International Bonds

While domestic bonds are known for their safety, international bonds do not offer many of the same features. One risk that comes with investing in international bonds is currency risk. While the investment might go well, if the value of the foreign currency that you are investing in goes down in relation to the dollar, you could lose a good part of your investment. 

Another risk associated with international bonds is that you have an unenforceable claim. If the company that you have invested in goes into default, you have no legal rights to try and get your investment back. 

blog comments powered by Disqus