This International Bond ETF Could Offer High Yields -- and Higher Risk

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If you want to diversify your portfolio away from U.S. stocks and bonds, one way to do it is to buy an international bond fund, like the Vanguard Total International Bond ETF (NASDAQ: BNDX).But if you want to earn higher yields and are willing to accept some additional risk, you could buy the Vanguard Emerging Markets Government Bond ETF (NASDAQ: VWOB). This international bond fund lets you own government debt from up-and-coming markets. The VWOB has outperformed the BNDX and another popular bond index fund, the Vanguard Total Bond Market ETF (NASDAQ: BND), for the past year.Will AI create the world's first trillionaire? Our team just released a report on the one little-known company, called an "Indispensable Monopoly" providing the critical technology Nvidia and Intel both need. Continue »VWOB Total Return Price data by YChartsHere are a few reasons why you might want to consider the VWOB for your bond portfolio -- and why you should also beware of the risks.When you buy emerging-market bonds, you are investing in debt issued by foreign governments from nations with emerging economies. That includes countries with economies that are more developed than some of the world's poorer nations, but that have not yet reached the more prosperous levels of advanced economies like the U.S., Japan, Canada, or Western Europe.Some emerging economies represented in the Vanguard Emerging Markets Government Bond ETF include:Saudi Arabia (13.5% of the fund)Mexico (11%)Turkey (6.4%)Indonesia (6.1%)United Arab Emirates (5.6%)Argentina (3.9%)Qatar (3.8%)Brazil (3.4%)The Vanguard Emerging Markets Government Bond ETF holds 902 bonds and charges an expense ratio of 0.15%. It has delivered average annual returns (by net asset value) of 2.6% for the past five years, 9.99% for the past three years, and 11.6% in the past year.Image source: Getty Images.High yields on bonds can be tempting. But emerging markets' government debt tends to be riskier than advanced economies' debt. Some of these countries are politically unstable, vulnerable to economic crises, or otherwise might struggle to repay their debts to bond investors like you.Let's compare the risk of emerging market government bonds to U.S. bonds. For example, about 41% of the emerging-market bonds in the VWOB have a credit rating of BB or lower, making them speculative grade. But in the Vanguard Total Bond Market ETF, 69% of the fund's bonds are U.S. government bonds (generally considered some of the safest in the world), while the other 31% of the bonds have investment-grade credit ratings of BBB or higher.Terms and Privacy PolicyPrivacy & Cookie SettingsMore InfoS&P 5006,740.02 -90.69 (-1.33%)Dow 3047,501.55 -453.19 (-0.95%)Nasdaq22,387.68 -361.31 (-1.59%)Russell 20002,525.30 -60.27 (-2.33%)VIX29.49 +5.74 (+24.17%)Gold5,158.70 +80.00 (+1.58%)Trending tickersBTC-USD Bitcoin USD 67,872.82 -280.78 (-0.41%)HIMS Hims & Hers Health, Inc. 15.74 -0.14 (-0.88%)ETH-USD Ethereum USD 1,981.13 +9.51 (+0.48%)XRP-USD XRP USD 1.36 +0.01 (+0.83%)KLAC KLA Corporation 1,344.55 -84.81 (-5.93%)PortfolioSign in to access your portfolioSign inTop gainersDAWN Day One Biopharmaceuticals, Inc. 21.20 +8.42 (+65.88%)IOT Samsara Inc. 35.36 +5.78 (+19.54%)MRVL Marvell Technology, Inc. 89.57 +13.89 (+18.35%)EMAT Evolution Metals & Technologies Corp. 9.76 +1.25 (+14.69%)IOVA Iovance Biotherapeutics, Inc. 5.13 +0.55 (+12.01%)Top losersINGM Ingram Micro Holding Corporation 22.06 -4.30 (-16.31%)BE Bloom Energy Corporation 135.19 -24.80 (-15.50%)GAP The Gap, Inc. 23.28 -3.92 (-14.41%)LITE Lumentum Holdings Inc. 558.44 -92.38 (-14.19%)JEF Jefferies Financial Group Inc. 38.29 -5.99 (-13.53%)Most activeNVDA NVIDIA Corporation 177.82 -5.52 (-3.01%)ONDS Ondas Inc. 9.83 -0.63 (-6.05%)AAL American Airlines Group Inc. 11.18 -0.61 (-5.17%)MRVL Marvell Technology, Inc. 89.57 +13.89 (+18.35%)BBD Banco Bradesco S.A. 3.6800 -0.0600 (-1.60%)Top economic eventsEarnings eventsMy earnings eventsEarnings events