Outside US investing....

[Gigi3000]

Do you buy CDs or Treasury equivalents in any
foreign countries? We can include mutual funds too.

[retiredguy123]

Do you buy CDs or Treasury equivalents in any
foreign countries? We can include mutual funds too.
I don't. Foreign bonds are not insured or backed by the U.S. Government. They are not "equivalent".

[manaboutown]

I own two dividend oriented international ETFs, IQDG and EUDG. They comprise only a small percentage of my portfolio.

Back in the late 1970s, very early 1980s a colleague at work spent a lot of time in a small town a good ways down on the west coast of Mexico. He converted a substantial amount of his savings into pesos and deposited them into a CD or similar savings instrument in a Mexican bank as they were paying a very high interest rate, maybe 18 - 22%. Then the peso devaluations started. The bank would not return his money as he had time deposits. His losses were terrible.

Oh, the town is San Blas. It was a small fishing village back then. San Blas Mexico | Hotels, Beaches, Nature, Things to Do (https://www.rivieranayarit.com/destinations/san-blas/)

[Gigi3000]

I own two dividend oriented international ETFs, IQDG and EUDG. They comprise only a small percentage of my portfolio.

Back in the late 1970s, very early 1980s a colleague at work spent a lot of time in a small town a good ways down on the west coast of Mexico. He converted a substantial amount of his savings into pesos and deposited them into a CD or similar savings instrument in a Mexican bank as they were paying a very high interest rate, maybe 18 - 22%. Then the peso devaluations started. The bank would not return his money as he had time deposits. His losses were terrible.

This is my fear in the states. I feel there's an elephant in the room and everyone is in denial.

[manaboutown]

This is my fear in the states. I feel there's an elephant in the room and everyone is in denial.

Times are scary when even Swiss banks get into trouble! Exclusive-Qatar fund explored claims against Switzerland for Credit Suisse losses (https://finance.yahoo.com/news/exclusive-qatar-fund-explored-claims-171427610.html)

[coralway]

Do you buy CDs or Treasury equivalents in any
foreign countries? We can include mutual funds too.




nope - only a couple of Canadian stocks that trade on the TO exchange.

[petsetc]

... We can include mutual funds too.

Since ~2005, we have maintained about 40% international (mutual funds) in the equity portion of our investments believing that if 50% of the world economy is not in USA then opportunity exists elsewhere too. It has fared well for us.

A good starting place to look at potential mix(es) is paulmerriman.com who recommends some equity mixes under his portfolios>mutual funds.

[retiredguy123]

Since ~2005, we have maintained about 40% international (mutual funds) in the equity portion of our investments believing that if 50% of the world economy is not in USA then opportunity exists elsewhere too. It has fared well for us.

A good starting place to look at potential mix(es) is paulmerriman.com who recommends some equity mixes under his portfolios>mutual funds.
I don't know what you mean by fared well, but Vanguard has an international stock index fund, a total stock market index fund (US stocks), and an S&P 500 stock index fund. Over the past 10 years, here is how they have performed on an average annual basis:

International fund, 4.43 percent
Total stock fund, 11.68 percent
S&P 500 fund, 12.20 percent

Also, the international fund has a risk rating of 5, but the two U.S. stock funds have a risk rating of 4. I think I will stick with U.S. stocks.

[spinner1001]

Do you buy CDs or Treasury equivalents in any
foreign countries? We can include mutual funds too.

No, I don’t. There’s no free lunch.

If you want to invest that way chasing higher interest rates in other countries, you might consider that country interest rates are associated with country inflation rates. Higher inflation rate —> Higher interest rates. (If you want to read about it, look up Fisher’s equation on interest.)

Why does this matter? If you buy a foreign debt instrument in their local currency such as pesos, you are exposed to currency exchange risk — future currency depreciation against the US dollar. A country with higher inflation will likely have its currency depreciate against the dollar that shows up in exchange rates. (This does not apply if you buy a foreign bond denominated in US dollars.) For instance, if you buy a foreign one-year CD paying 10% interest, you must first convert your dollars into the foreign currency at today’s exchange rate. In one year, you have earned 10% interest from the foreign bank. If you want your money back in US dollars in one year, you must convert your foreign money using the currency exchange rate at that time. If the foreign currency depreciated 15% against the dollar, you have lost money. You earned 10% in interest and lost 15% in the currency exchange.

International investing: Inflation rates, interest rates, and currency exchange rates are linked together. In addition to exchange risk, you may be exposed to default risk.

Take a look at the government bonds paying higher interest rates at the link below. These high-interest countries generally have higher inflation rates or higher default risk or both.

10-year government bond yield by country 2023 | Statista (https://www.statista.com/statistics/1211855/ten-year-government-bond-yield-country/)

Moral of the story: There is no such thing as a free lunch of higher interest rates without accepting higher risk.

[CoachKandSportsguy]

If you buy foreign stocks or bonds or other financial interests, you are exposed to CURRENCY fluctuations. .
and unless you BUY at the top of the US DOLLAR strength, and you SELL at the bottom of the US DOLLAR weakness, you are generally going to lose with an 8% currency cost for conversion. .

good luck

[spinner1001]

I don't know what you mean by fared well, but Vanguard has an international stock index fund, a total stock market index fund (US stocks), and an S&P 500 stock index fund. Over the past 10 years, here is how they have performed on an average annual basis:

International fund, 4.43 percent
Total stock fund, 11.68 percent
S&P 500 fund, 12.20 percent

Also, the international fund has a risk rating of 5, but the two U.S. stock funds have a risk rating of 4. I think I will stick with U.S. stocks.

Investing in foreign stocks is different than investing in foreign debt instruments. Investing in foreign equities is generally wise for portfolio diversification reasons IF your investment horizon is longer. If your horizon is shorter and investing in foreign equities, be very careful.

[CoachKandSportsguy]

Investing in foreign stocks is different than investing in foreign debt instruments. Investing in foreign equities is generally wise for portfolio diversification reasons IF your investment horizon is longer. If your horizon is shorter and investing in foreign equities, be very careful.

in reality, its not really needed as the SP50 revenue has a very large portion of intl revenues and costs from world leading global companies.

The intl funds end up being riskier tiered companies, so you are diversifying by adding a lower quality set of companies. .

[retiredguy123]

I suspect that a lot of people own international stocks and/or bonds because they were recommended by a financial advisor. If you are paying an advisor to invest your money, I would recommend that you compare your total return to the S&P 500 index and total bond index least once per year. An honest advisor should do this for you. If the advisor is not getting a higher return than the indexes, then you are paying the advisor for nothing. Fire the advisor and buy some Vanguard index funds.

[manaboutown]

Many of the S&P 500 are in fact international companies as they both manufacture and sell in foreign countries so investing in a S&P 500 index fund gives one international exposure.

Years ago after a trip to New Zealand I bought a few shares of a telecommunications company down there, SPKKY. It has been no great shakes but pays a decent dividend so I have kept it. New Zealand income taxes are withheld from the dividends paid to me. I imagine foreign taxes are due and likely withheld on interest paid on bonds as well as stock dividends.

[Ecuadog]

If you buy foreign stocks or bonds or other financial interests, you are exposed to CURRENCY fluctuations...

What about countries that use the US dollar as their official currency?

[Boomer]

Do you buy CDs or Treasury equivalents in any
foreign countries? We can include mutual funds too.

I am of the “better the devil I know” philosophy.

Boomer

[manaboutown]

How about investing in Japan?

I remember how it was back in 1990 when Japanese business people were making it big. I actually worked for a large Japanese company at that time and experienced it first hand (and first class). Then things changed, as they inevitably do. but now...drum roll...

Warren Buffett leads global investors into 'cheap' Japan -
Nikkei Asia (https://asia.nikkei.com/Spotlight/Market-Spotlight/Warren-Buffett-leads-global-investors-into-cheap-Japan#:~:text=Then%20Buffett%2C%20chief%20executiv e%20of,outside%20the%20U.S.%20and%20Europe).

[Gigi3000]

Their national debt is worse than ours, I believe.

[manaboutown]

Their national debt is worse than ours, I believe.

It seems their demographic pretty much aged into retirement coupled with a low birthrate. That may have something to do with it. I really know almost nothing about the situation in Japan.

"A flurry of big spending packages and ballooning social welfare costs for a rapidly ageing population have left Japan with a debt pile 263% the size of its economy - double the ratio for the United States and the highest among major economies."

From: Analysis: Japan'''s debt time bomb to complicate BOJ exit path | Reuters (https://www.reuters.com/markets/asia/japans-debt-time-bomb-complicate-boj-exit-path-2023-02-10/#:~:text=A%20flurry%20of%20big%20spending,the%20hi ghest%20among%20major%20economies).

[CoachKandSportsguy]

What about countries that use the US dollar as their official currency?


Because the SP500 companies are already there, and you have that in your base portfolio, the intl funds end up being riskier tiered companies, so you are diversifying by adding a lower quality set of companies, no matter what currency the home country is using.

[Ecuadog]

If you buy foreign stocks or bonds or other financial interests, you are exposed to CURRENCY fluctuations...
What about countries that use the US dollar as their official currency?
Because the SP500 companies are already there, and you have that in your base portfolio, the intl funds end up being riskier tiered companies, so you are diversifying by adding a lower quality set of companies, no matter what currency the home country is using.

I think you're talking solely about foreign stocks, bonds and funds. I don't see other financial interests, such as CDs, being exposed to CURRENCY fluctuations in a country that uses the US dollar as its official currency.

[CoachKandSportsguy]

I think you're talking solely about foreign stocks, bonds and funds. I don't see other financial interests, such as CDs, being exposed to CURRENCY fluctuations in a country that uses the US dollar as its official currency.

True, but the list is pretty small and the countries are pretty small.
Countries Using the US Dollar (https://www.investopedia.com/articles/forex/040915/countries-use-us-dollar.asp)

The list of countries are:
Ecuador (which you might have in your name, which is most likely the basis for your point? I have been to Guayaquil and Quito, but in the late 70's)

Puerto Rico
El Salvador
Zimbabwe
Guam
Virgin Islands
British Virgin Islands
Panama
Bonaire
Democratic Republic of Timor-Leste (where?)
American Samoa
Commonwealth of the Northern Mariana Islands
Federated States of Micronesia
Republic of Palau
Marshall Islands
Turks and Caicos

There are many other countries which peg/fix their local currency to the US dollar, however those pegs can be broken, and are subject to the whims of the foreign government, and crashing economies.

[Ecuadog]

I think you're talking solely about foreign stocks, bonds and funds. I don't see other financial interests, such as CDs, being exposed to CURRENCY fluctuations in a country that uses the US dollar as its official currency.

True, but the list is pretty small and the countries are pretty small.
...

There are many other countries which peg/fix their local currency to the US dollar, however those pegs can be broken, and are subject to the whims of the foreign government, and crashing economies.

It's not the size of the country that matters, but the stability of the issuing entity, e.g bank or credit union, that matters.

I am not talking about countries that peg/fix their local currency to the US dollar. I am talking about countries that have adopted the US dollar as their official currency.

The OP inquired about investing in CDs in foreign countries. I don't invest overseas because I like to keep life simple. However, I have looked into it, specifically in Ecuador, where the official currency is the US dollar.

In January of this year, Banco Diners Club of Ecuador was issuing 1-year CDs that returned 7.20%, in US dollars. It's probably higher now. I imagine that the hoops that one has to jump through in order to qualify are complicated. I wonder about Puerto Rico or the Virgin Islands.

[CoachKandSportsguy]

It's not the size of the country that matters, but the stability of the issuing entity, e.g bank or credit union, that matters.

The OP inquired about investing in CDs in foreign countries. I don't invest overseas because I like to keep life simple. However, I have looked into it, specifically in Ecuador, where the official currency is the US dollar.

In January of this year, Banco Diners Club of Ecuador was issuing 1-year CDs that returned 7.20%, in US dollars. It's probably higher now. I imagine that the hoops that one has to jump through in order to qualify are complicated. I wonder about Puerto Rico or the Virgin Islands.

So what firm would you use to buy the CD? and for the foreign country market access and transaction, you might have to pay to a hefty commission. I have purchased intl equities through Fidelity, and the commission was hefty, fortunately it was a big percentage return. Not familiar with the intl purchase of CDs. . .

[Ecuadog]

So what firm would you use to buy the CD? and for the foreign country market access and transaction, you might have to pay to a hefty commission. I have purchased intl equities through Fidelity, and the commission was hefty, fortunately it was a big percentage return. Not familiar with the intl purchase of CDs. . .

I really don't know. I was interested in CDs in Ecuador because I have an address in the country and could deal directly with the bank. Foreigners can open bank accounts in Ecuador. One of the requirements being that you have a residence, usually. Some institutions are more lienient and the requirements may vary. They might adjust their requirements with letters of credit or with minimum deposits. I decided to do nothing.

For what it is worth, Citi Bank has a branch in Quito, Ecuador and Banco Pichincha has a branch in Coral Gables, Florida.

[spinner1001]

If someone is considering buying a CD at a foreign bank chasing higher interest rates, be aware that US citizens are required to file one or two special US government forms reporting their foreign bank accounts if their foreign accounts exceed specified thresholds. The penalties for not filing are relatively significant. Also, many US citizens with foreign bank accounts have a tax professional prepare their reporting form(s) and may incur an extra preparer cost.

Here are the forms:
FinCEN’s FBAR: Report Foreign Bank and Financial Accounts | FinCEN.gov (https://www.fincen.gov/report-foreign-bank-and-financial-accounts)
IRS’s form 8938: About Form 8938, Statement of Specified Foreign Financial Assets | Internal Revenue Service (https://www.irs.gov/forms-pubs/about-form-8938)

[Fltpkr]

Do you buy CDs or Treasury equivalents in any
foreign countries? We can include mutual funds too.

Not certain if you are including balanced funds such as Vanguard’s Target Retirement or Lifestrategy Funds in your question, but they have a portion of the fund holdings in non-US bonds. I believe that Vanguard also offers mutual funds devoted to bonds outside the US. When I have tried to time the market or chase returns, I have usually ended up regretting it. So, I have tried to resist reacting to the stock or bond market and stay mostly invested in balanced funds. I use Vanguard exclusively except for a portion actively invested at a bank-associated investment group, which has not really done any better or worse than Vanguard thru market ups and downs.

[Ecuadog]

If someone is considering buying a CD at a foreign bank chasing higher interest rates, be aware that US citizens are required to file one or two special US government forms reporting their foreign bank accounts if their foreign accounts exceed specified thresholds. The penalties for not filing are relatively significant. Also, many US citizens with foreign bank accounts have a tax professional prepare their reporting form(s) and may incur an extra preparer cost.

...

Thank you for that. The IRS is one of the reasons I decided not to pursue it.

I do wonder what the CD rates are in Puerto Rico and the Virgin Islands. US territories and possessions are not considered "foreign" for FBAR.

[OrangeBlossomBaby]

My family has owned Israel bonds since the 1950's when they first became available. I had five in my name as a gift from my grandmother when I was born. I cashed them in somewhere around 2010.

[retiredguy123]

I am of the “better the devil I know” philosophy.

Boomer
I agree. Stock and bond purchases in the U.S. are regulated by the SEC, which may or may not be effective. But, who knows what regulations control stocks and bonds in other countries?

[Gigi3000]

It's not the size of the country that matters, but the stability of the issuing entity, e.g bank or credit union, that matters.

I am not talking about countries that peg/fix their local currency to the US dollar. I am talking about countries that have adopted the US dollar as their official currency.

The OP inquired about investing in CDs in foreign countries. I don't invest overseas because I like to keep life simple. However, I have looked into it, specifically in Ecuador, where the official currency is the US dollar.

In January of this year, Banco Diners Club of Ecuador was issuing 1-year CDs that returned 7.20%, in US dollars. It's probably higher now. I imagine that the hoops that one has to jump through in order to qualify are complicated. I wonder about Puerto Rico or the Virgin Islands.

Cant find a yield for Diners Club without giving my personal information. Does Ecuador do any backing of bank CDs or Investment Certificates? I didnt see anything on their website about this.

[Gigi3000]

It's not the size of the country that matters, but the stability of the issuing entity, e.g bank or credit union, that matters.

I am not talking about countries that peg/fix their local currency to the US dollar. I am talking about countries that have adopted the US dollar as their official currency.

The OP inquired about investing in CDs in foreign countries. I don't invest overseas because I like to keep life simple. However, I have looked into it, specifically in Ecuador, where the official currency is the US dollar.

In January of this year, Banco Diners Club of Ecuador was issuing 1-year CDs that returned 7.20%, in US dollars. It's probably higher now. I imagine that the hoops that one has to jump through in order to qualify are complicated. I wonder about Puerto Rico or the Virgin Islands.

Cant find a yield for Diners Club without giving my personal information. I assume it could be 8 percent. Does Ecuador do any backing of bank CDs or Investment Certificates? I didnt see anything on their website about this. Someone else said its the bank's rating to look for and they do have an AAA rating but the country credit rating is B-. I guess i dont know how to access the risk.

[JMintzer]

My family has owned Israel bonds since the 1950's when they first became available. I had five in my name as a gift from my grandmother when I was born. I cashed them in somewhere around 2010.

I bought a small forest in Israel...

[Ecuadog]

Cant find a yield for Diners Club without giving my personal information. I assume it could be 8 percent. Does Ecuador do any backing of bank CDs or Investment Certificates? I didnt see anything on their website about this. Someone else said its the bank's rating to look for and they do have an AAA rating but the country credit rating is B-. I guess i dont know how to access the risk.

Ecuador's Deposit Insurance Corporation (CFN) insures only up to $32,000 per person, per institution.

Right now, the country is in turmoil. The president has dissolved the congress and forced a new general election.

[manaboutown]

This is about the Japanese market. Subscribe to read | Financial Times (https://www.ft.com/content/3a6541da-7ee3-4b6c-85cf-f6167125d0b1?ftcamp=traffic/partner/feed_headline/us_yahoo/auddev)