Vanguard Total International Bond ETF

BNDX

Market cap $69.7B

The first interest rate cut of the year put fixed income investors on notice that the high-rate, high-yield environment they've been accustomed to is beginning to change. With that, emerging market (EM) bonds may be an option to consider when looking to diversify income and/or maximize yield potential.

IAGG and BNDX are top international bond ETFs for U.S. investors, both offering currency-hedged exposure to investment-grade debt outside the U.S. IAGG has modestly outperformed BNDX over the past three years, seemingly due to heavier sovereign exposure, full index replication, and tighter tracking. With the Fed now easing, domestic bond funds like BND may be better positioned for near-term gains than IAGG or BNDX.

As fund flows during the month of July indicated, more investors continue to head overseas in order to get international bond exposure according to data from Morningstar. For those looking to overcome their U.S. bond home country biases, Vanguard has three funds that are worthy of consideration.

With talk of rate cuts getting more audible, they almost seem inevitable. Indeed, the CME FedWatch is forecasting an almost 90% chance of cuts.

Don't buy all the “America First” talk coming out of DC. Truth is, Uncle Sam's recent moves are quietly making foreign bonds—especially the 5 bond funds (yielding up to 9.3%!

One old rule of thumb on Wall Street is that investors should put 60% of their assets in stocks and 40% in bonds to create a balanced portfolio. If you are aggressive, you could go 80/20, and if you are conservative, you could go 40/60.

BNDX offers diversified international fixed income exposure with a medium-term duration and a competitive 5.1% yield to maturity. BNDX primarily allocates to European government bonds with a certain degree of exposure across corporates and ABSs. The ETF employs currency hedging to de-risk cash flows for investors.

If you want to make money on popular ETFs this year, there's one key strategy — avoid the S&P 500.

The Vanguard Total International Bond Index Fund ETF (BNDX) offers global diversification, hedges USD risk, and has a 7.1-year effective duration. BNDX ETF invests in sovereign, corporate, and asset-backed securities, with significant exposure to Japan, France, Germany, Italy, the UK, Canada, and Spain. Despite its diversification benefits, regional sovereign spreads are unattractive. Moreover, rising CDS spreads and global economic contagion suggest risky credit is unappealing.

The stock market has been ugly (particularly growth stocks), and it could get much worse. Thankfully, however, there is another way. Income investing focuses on big, steady dividend and interest payments, thereby allowing investors to worry far less about price volatility (as long as those big income payments keep coming in). This report shares 5 big safe yield strategies (including a variety of top income ideas), and then concludes with an important takeaway about succeeding in this market.