The following is my answer to a Quora
question: “I
would like to move most of my retirement investment into China bonds. Is there a risk I will not be able to collect
on them due to political events?”
Chinese sovereign bonds have a good
rating, and will pay out regardless of the political situation. An economy the size of China cannot afford not
to pay out. This will shatter the market
confidence in the Chinese economy, and make it more expensive to borrow in the
future. China is not going to take that
chance.
However, the concern here is your
portfolio diversity. If you move most of
your portfolio to debt instruments, your risk is reduced. Because it is only Chinese bonds, your risk
then goes up. And because these are debt
instruments, your yield is not likely to be above the rate of inflation. Your portfolio will be losing money in real
terms. That is not what I would
recommend.
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