Thank you for your response.mmm I think there needs better clarity on the intent of bond funds, which usually is to provide ballast when market drop, and if you mean 'dry powder' as in rebalancing (say you have a 60/40 portfolio, stock market drops, your portfolio is then 55/45, you sell bonds high and buy stocks low to get back to 60/40) then you are right. but not dry powder in the sense of 'market drops and I'll sell all bonds to buy stocks'
Given the objective is to provide ballast, you want something not very volatile. if you want something not very volatile, you do not want currency exchange rates to affect the value of your bond fund, because currency fx is very volatile. so you go for hedged bond funds, and you choose the currency that you plan to retire to (i.e., the currency of the expected expenditures).
think of it as the point for bonds is to dampen the volatility rather than 'dry powder' or profiting more/less. then of course if bonds crash less or do no crash at all, by definition there will be space for rebalancing.
with all this said, going 50-50 global bond unhedged and global bond hedged to eur is certainly not a terrible way to approach this if you aren't sure.
Yes I ment that Bonds should provide ballast.
I thought that this would be better achieved if I have a currency unhedged fund because for example if there is a crisis and the Euro goes down a lot for example due to some political changes and world markets drop, then if I rebalance into the s&p 500 from a hedged fund to euros I would have much less purchasing power than from an unhedged fund (where the US bonds would presumably have gone up when US stocks have gone down or at least being in the same currency wouldn't have had a drop due to a weakening euro, which would have been the case if I had hedged).
Of course this can work the other way as well and the Euro could strengthen but what I mean is that it seems that an unhedged seems naturally suited to provide rebalance to a unhedged world stock fund. I don't know if this makes sense?
Statistics: Posted by Francesco — Wed Jun 26, 2024 12:26 am — Replies 2 — Views 415