interest rate hikes hurting my principal

Hi All,

I own a Fidelity Mutual Fund that covers Ohio municipal bonds.
It's been a bit of a loser since the fed started hiking interest
rates. Since rates are probably going to keep getting hiked
I'm thinking about cashing out and buying an international
fund (I don't own any international stocks).

What do people think of Latin America?
Or how about Japan or Korea?

I've read good things about those 3 areas. Just wondering
what people around here think.

-Debbie Lowe

Re: interest rate hikes hurting my principal

"Deb" <> wrote in message
news:HSOkf.12432$
> Hi All,
>
> I own a Fidelity Mutual Fund that covers Ohio municipal bonds.
> It's been a bit of a loser since the fed started hiking interest
> rates. Since rates are probably going to keep getting hiked
> I'm thinking about cashing out and buying an international
> fund (I don't own any international stocks).
>
> What do people think of Latin America?
> Or how about Japan or Korea?

You might be too late for the dance, like you were with bonds :-)

>
> I've read good things about those 3 areas. Just wondering
> what people around here think.
>
> -Debbie Lowe
>

Re: interest rate hikes hurting my principal

For what purpose are you investing?

Saving for a house?

Retirement?

Something else?

I ask because switching from municipal bonds to an
international fund is a fairly big leap, risk-wise.

"Deb" <> wrote
> Hi All,
>
> I own a Fidelity Mutual Fund that covers Ohio municipal
bonds.
> It's been a bit of a loser since the fed started hiking
interest
> rates. Since rates are probably going to keep getting
hiked
> I'm thinking about cashing out and buying an international
> fund (I don't own any international stocks).
>
> What do people think of Latin America?
> Or how about Japan or Korea?
>
> I've read good things about those 3 areas. Just wondering
> what people around here think.
>
> -Debbie Lowe
>

Re: interest rate hikes hurting my principal

Deb wrote:
> Hi All,
>
> I own a Fidelity Mutual Fund that covers Ohio municipal bonds.
> It's been a bit of a loser since the fed started hiking interest
> rates. Since rates are probably going to keep getting hiked
> I'm thinking about cashing out and buying an international
> fund (I don't own any international stocks).
>
> What do people think of Latin America?
> Or how about Japan or Korea?
>
> I've read good things about those 3 areas. Just wondering
> what people around here think.

iShares MSCI Mexico (Free) Index (EWW) has been in the runnings for
sometime - not all that unusual to see them swing 3-5% either way from
late morning on into afternoon trading.

Re: interest rate hikes hurting my principal

"Deb" <> wrote

> Hi All,

Hi Deb.

> I own a Fidelity Mutual Fund that covers Ohio municipal bonds.
> It's been a bit of a loser since the fed started hiking interest
> rates. Since rates are probably going to keep getting hiked
> I'm thinking about cashing out and buying an international
> fund (I don't own any international stocks).

Bond funds are for people that need the income and/or want to reduce risk.
Generally speaking, muni funds are for higher tax bracket people that want
the income.

> What do people think of Latin America?
> Or how about Japan or Korea?

I think you should own international stocks. I would do it using Fidelity
Diversified International if I were you and avoid single country or regional
funds unless you are a market watcher/timer. An allocation of 25% - 40% is
reasonable.

> I've read good things about those 3 areas. Just wondering
> what people around here think.

Usually when people are hearing good things about an area or sector the
party is near the end. Latin America and Korea have been very good for some
time now and probably hold the most risk. Japan has been strong since May
and could go a lot higher, or not. Time will tell.

Ooops....

"Ed" <> wrote

> I think you should own international stocks. I would do it using Fidelity
> Diversified International if I were you and avoid single country or
> regional funds unless you are a market watcher/timer. An allocation of
> 25% - 40% is reasonable.

Fidelity Diversified International is closed to new investors.
Look at the Fidelity International Discovery Fund instead if you want to
stay in the Fidelity family.

Re: interest rate hikes hurting my principal

Elle <> wrote:
> For what purpose are you investing?
> Saving for a house?
> Retirement?
> Something else?
> I ask because switching from municipal bonds to an
> international fund is a fairly big leap, risk-wise.

I have this in my ROTH IRA. I don't have any international exposure and I figure
it's time to get in on it.

I also own some Ohio municipal bonds directly outside of the fund. I really think
I've got too much of my money focused in this area and the bond fund will probably
continue to go down as interest rates get hiked.

-Deb

Re: Ooops....

Hi Deb,

In a rising rate environment, the value of existing bonds on the market
goes down. The reverse is true when rates are falling. While this
doesn't apply if you hold the actual bond to maturity, most of us don't
have that kind of money (to buy a basket) and so resort to mutual
funds. Most of your municipal funds invest in longer term bonds and
they get hurt by rising rates.

How is works is like this. If I own a $10K bond that is paying 5% and
rates rise, I'd have to sell that bond for less than face to convince
someone to buy it when they can buy a new bond that's paying 6%. When
rates drop, my 5% bond is worth more, if all you can buy new is paying
4%.

Now, all of that said, you Ohio muni bond fund should be in your
allocation for a reason that that's TAX FREE dividends. This is why I
own MIY a closed end Michigna muni bond fund in my taxable account. I
don't care about the principal as much as the yield (6.3%) which is tax
exempt on both my state and federal returns.

Generally, when rates are rising, you want to stay on the shorter end
of the bond market and wait until rates climb before rotating in to
longer term stuff.

As for Japan, Korea and Latin America - they've been roaring and I see
this continuing to happen. I think there are two ways to cover this
space with reduced risk - one is to buy an emerging mkts fund that will
cover both latin america, eastern europe (also been on a tear) and the
lesser known economies in asia (Price PRMSX would work). As for asia,
I think a pan-asian fund is best and for this I like Matthews Asian
Pacific MPACX because it covers everyone including Japan. Be careful
with asian funds because many cover all of asia EXCEPT Japan.

best,

rono

Re: Ooops....

Ed <> wrote:
>
> "Ed" <> wrote
>
>> I think you should own international stocks. I would do it using Fidelity
>> Diversified International if I were you and avoid single country or
>> regional funds unless you are a market watcher/timer. An allocation of
>> 25% - 40% is reasonable.
>
> Fidelity Diversified International is closed to new investors.
> Look at the Fidelity International Discovery Fund instead if you want to
> stay in the Fidelity family.

Thanks Ed - this exactly the kind of feedback I was looking at. I saw some
of the returns on latin america and wondered how long that could go on.

Too bad Fidelity doesn't have a more reliable Japan fund :-/

-Deb

Re: Ooops....

Hi Deb,

Playing individual countries is always dicey as any number of things
can happen - or go wrong, as the case may be. Even playing regions has
a higher degree of risk than taking a broad based approach. However,
the broader your approach, while carrying less risk, can also dampen
your returns.

Japan's economy seems to have turned the corner and their markets are
producing great returns. However, how much of this is due to china?
The same could be said about Korea. I think that asia is definitedly a
place to be with any well rounded portfolio. However, it can be played
with a greater degree of safety with a pan-asian fund. I like Price
New Asia PRASX, but it doesn't have any Japan. Matthews is a great
noload family for playing asia, but they only have two broad asian
funds that cover Japan - Asian Pacific MPACX and Asian Tech MATFX. The
former would be a safer play. They also have single country funds, but
these again, carry more risk. I've avoid Latin America directly, this
time, but carry it indirectly via a well rounded emerging mkts fund.
I'm using Price PRMSX, but there are lots.

I think a prudent approach to int'l investing is to have somewhere
between 15-30% overseas. Not in a global fund, but in int'l funds. Of
this, half could be in emerging mkts while the other half could be in a
very broad based int'l fund. Others have suggestions for Fido, but
most of your better noload families have good selections - Fido,
Vanguard, Price, American Century.

best,

rono

Re: interest rate hikes hurting my principal

FSIIX

Can't beat its 0.1% expense ratio. It mimics a popular
international index.

For ideas on the percent to allocate internationally, try
some of the free online tools listed at
.

"Deb" <> wrote
> Elle <> wrote:
> > For what purpose are you investing?
> > Saving for a house?
> > Retirement?
> > Something else?
> > I ask because switching from municipal bonds to an
> > international fund is a fairly big leap, risk-wise.
>
> I have this in my ROTH IRA. I don't have any
international exposure and I figure
> it's time to get in on it.
>
> I also own some Ohio municipal bonds directly outside of
the fund. I really think
> I've got too much of my money focused in this area and the
bond fund will probably
> continue to go down as interest rates get hiked.
>
> -Deb

Another name change. Same shithead.

"Tess Millay" <> wrote

Are you unhappy with yourself?
I can't imagine why.

Re: interest rate hikes hurting my principal

"Tess Millay" <> wrote

> FSIIX
>
> Can't beat its 0.1% expense ratio. It mimics a popular
> international index.

You place too much weight on expenses.

FSIIX
1/3/5 YEARS
13.00%/20.04%/3.96%
Expenses 0.10%

FIGRX
17.28%/22.86%/7.73%
Expenses 1.08%

FSIIX would have made one penny wise and pound foolish.
It mimics the MSCI EAFE so it has about 25% in Japan and 25% in the UK. As
long as these two countries do well the index will be just fine, it wasn't
always so.

Re: interest rate hikes hurting my principal

municipal bonds in a roth IRA- the roth IRA will already generate tax
free withdraws, no need for municpal bonds in a tax advantaged account.

Re: interest rate hikes hurting my principal

"jIM" <> wrote in message
news:
> municipal bonds in a roth IRA- the roth IRA will already generate tax
> free withdraws, no need for municpal bonds in a tax advantaged account.

That occured to me, I didn't think Fidelity would allow that fund to be
purchased into an IRA. Here's a copy and paste from their fund profile:
Retirement Accounts No

Re: interest rate hikes hurting my principal

Deb wrote:
> Elle <> wrote:
> > For what purpose are you investing?
> > Saving for a house?
> > Retirement?
> > Something else?
> > I ask because switching from municipal bonds to an
> > international fund is a fairly big leap, risk-wise.
>
> I have this in my ROTH IRA. I don't have any international exposure and I figure
> it's time to get in on it.

Why would you have muni bond fund in your IRA?

>
> I also own some Ohio municipal bonds directly outside of the fund. I really think
> I've got too much of my money focused in this area and the bond fund will probably
> continue to go down as interest rates get hiked.
>
> -Deb

Re: interest rate hikes hurting my principal

Grammar School, or High School?

Oh, you meant principle?

Arne, "Laissez les bon temps roulez"

Re: interest rate hikes hurting my principal

"happy-guy" <> wrote
> Grammar School, or High School?
>
> Oh, you meant principle?

Post-o on you, happy guy.

Re: Ooops....

rono wrote:
> Japan's economy seems to have turned the corner and their markets are
> producing great returns. However, how much of this is due to china?
> The same could be said about Korea. I think that asia is definitedly a
> place to be with any well rounded portfolio. However, it can be played
> with a greater degree of safety with a pan-asian fund. I like Price
> New Asia PRASX, but it doesn't have any Japan. Matthews is a great
> noload family for playing asia, but they only have two broad asian
> funds that cover Japan - Asian Pacific MPACX and Asian Tech MATFX. The
> former would be a safer play.

I kept one Japan fund - bought two at the time, about 10/12/5. Holding
it's own on a longer end of short hauls.



> They also have single country funds, but
> these again, carry more risk. I've avoid Latin America directly, this
> time, but carry it indirectly via a well rounded emerging mkts fund.
> I'm using Price PRMSX, but there are lots.

I must admit, I've been much less reticent about losing vast sums over
broader, institutional garners, such as EUROX, although for a sector
play, watcher/timer/ and risker taker, I feel somewhat amiss (apart the
$500 bottom line for $3K on 10/26, & $1K on 11/26).



> I think a prudent approach to int'l investing is to have somewhere
> between 15-30% overseas. Not in a global fund, but in int'l funds. Of
> this, half could be in emerging mkts while the other half could be in a
> very broad based int'l fund. Others have suggestions for Fido, but
> most of your better noload families have good selections - Fido,
> Vanguard, Price, American Century.

A theoretical FED doesn't seem especially imprudent about biasing
outsourced multinational corporate structures over greater socialized
globalization motifs, although I'd rather ponder my money well while in
bathtub operations.

Re: interest rate hikes hurting my principal

Deb wrote:

> Hi All,
>
> I own a Fidelity Mutual Fund that covers Ohio municipal bonds.
> It's been a bit of a loser since the fed started hiking interest
> rates. Since rates are probably going to keep getting hiked
> I'm thinking about cashing out and buying an international
> fund (I don't own any international stocks).
>
> What do people think of Latin America?
> Or how about Japan or Korea?
>
> I've read good things about those 3 areas. Just wondering
> what people around here think.

Debbie,
those two types of funds have very different purposes. I assume you had
invested in a municipal bond fund because you were looking for tax-free
income?

If so, you are incorrect that your municipal bond fund is a "loser."
The NAV (share price) may have declined, but you haven't lost one dime
in the fund unless you choose to sell the shares. Until then, you're
still enjoying the monthly income the fund is throwing off. As interest
rates rises, you'll likely be getting even more income.

So if you're still looking for tax-free income, I would advise you to
stay put.



--
Steven D. Litvintchouk
Email:

Remove the NOSPAM before replying to me.

Re: interest rate hikes hurting my principal

Deb wrote:

> Elle <> wrote:
>
>>For what purpose are you investing?
>>Saving for a house?
>>Retirement?
>>Something else?
>>I ask because switching from municipal bonds to an
>>international fund is a fairly big leap, risk-wise.
>
>
> I have this in my ROTH IRA.

Why would you own a municipal bond fund inside an IRA??? The only
advantage to a municipal bond fund is that it generates tax-free income,
but inside an IRA any income is tax-free anyway. Thus you're accepting
a lower yield from a municipal bond fund for no good reason, AFAIK.


--
Steven D. Litvintchouk
Email:

Remove the NOSPAM before replying to me.