Emerging market bonds provide good value now, especially when denominated in local currencies instead of the dollar. We’ve owned DoubleLine Emerging Markets Local Currency Bond (DLELX), which is positive for the year but has had ups and downs, notes Bob Carlson, editor of Retirement Watch.
A couple of key principles should be considered before taking any retirement or financial action. The first principle is: Take no one’s word for it. Something isn’t true simply because someone said it, even someone who seems authoritative and knowledgeable.
Years ago, I stopped spending much time watching the television financial channels. I noticed many people repeating rules of thumb, cliches, and “facts” apparently without realizing there is little research supporting them and often research refuting them. Other times, statements of fact are incomplete or out of context.
When I hear or read something interesting, I take notice. But then I look into it to decide if it’s worth acting on. This practice is especially important today because of all the published academic research that is refuted or withdrawn.
Another good principle is to recognize that most people don’t know what they don’t know, especially about retirement finances. They like to decide quickly, acting on the information at hand. Making the best decisions about retirement finances is difficult enough when you have all the information that can be gathered.
Good decisions are unlikely when time isn’t taken to gather necessary information and shortcuts or rules of thumb inform decisions. I’ve found many widely held beliefs really are myths.
These principles can be condensed to: Take your time. It is rare that a financial decision has to be made quickly.
As for DLELX, many emerging economies are in a different phase of the economic cycle than the United States. They aren’t tightening the money supply and raising interest rates. I also suspect that after a multi-year bull market, the dollar will fall against many currencies.
DLELX doesn’t track an index. The managers assess each country’s economy and determine which they want to invest in. The fund owns primarily sovereign bonds but also evaluates quasi-sovereign and corporate bonds, and buys those that have margins of safety and sell at reasonable prices.
The largest country exposures in the fund recently were Brazil, Mexico, South Africa, Indonesia, and Poland. The yield recently was 6.17%. The fund was recently down 2% over four weeks and 0.6% over three months, but up 5.1% so far in 2023 and 7.8% over 12 months.
Recommended Action: Buy DLELX.
