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foreign bond investment & finance definition

A debt security issued by a borrower from outside the country in whose currency the bond is denominated and in which the bond is sold. A bond denominated in U.S. dollars that is issued in the United States by the government of Canada is a foreign bond. A foreign bond allows an investor a measure of international diversification without subjection to the risk of changes in relative currency values. See also Eurobond.

Is it risky to invest in foreign securities?

Investing in foreign securities can actually reduce your overall portfolio risk and at the same time modestly increase the potential for returns. The U.S. stock market still remains the largest in the world; however, foreign markets now account for approximately 50% of the global stock market capitalization. Consequently, it is becoming more important to diversify portfolios globally, taking advantage of growth rates in different regions and countries. Proper international diversification can help balance out your returns by reducing or avoiding losses when the U.S. markets are underperforming.

Thomas M. Tarnowski, Senior Business Analyst, Global Investment Banking Division, Citigroup, Inc.—Salomon Smith Barney, New York, NY, and London, UK

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foreign bond investment & finance definition

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