With large mainstream U.S. income funds like Vanguard Total Bond Market ETF (BND) yielding just 2.43%, it has been a tough environment for retirees and other income investors.
That means that each $1 million in your retirement portfolio yields a paltry $2,025 per month. That’s hardly a king’s ransom.
That’s why U.S. retirees and income investors have been diversifying into other income-generating vehicles with higher yields.
The Biggest and Most Ignored Investment on the Planet
Alternatives to U.S. bonds include everything from Real Estate Investment Trusts (REITs) to Business Development Companies (BDCs) to Master Limited Partnerships (MLPs) and beyond.
A diversified portfolio consisting of 10 income investments that I track on a daily basis offers a terrific balance of risk and return. It boasts a solid yield of 4.52% — almost twice that of traditional income funds — with many investments paying out dividends on a monthly basis.
Among this portfolio of income investments is one asset class U.S. investors have all but ignored: foreign debt.
Just as U.S. investors have a “home country” bias by investing the bulk of their equity investments in U.S. stocks, they are also reluctant to invest the income portion of their portfolio in foreign bonds.
That’s ironic because foreign debt — when you take both sovereign and corporate debt together — is the single-largest asset class in the world.