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temsike,

Foreign bonds are available. But I wouldn't mess with them except within the framework of a fund.

Corporates is another matter, as is defining "diversification". For that, Chapter 20 of Barnhill's book offers as good an answer as any I've seen for its critique of attempts to simplistically apply concepts that might be appropriate to stock portfolio to bond portfolio.

If the purpose of "deworsification", as Buffet calls it, is to protect against ignorance, then the better techniques are either proper due diligence and/or proper position sizing. Diversification, however one wants to define it, comes in a poor third and should be a very minor concern compared to buying properly in the first place at a deep enough discount to create a margin of safety.

Yes, the mutual funds tout "instant diversification" as one of their talking points. But grind through their schedules of holdings sometime and run correlation tests. What they preach and what they practice are worlds apart. They make very focused bets whose correlations tend toward 1.0 when their holdings come under stress. Thus, when diversification is most needed, they cannot offer it. That, too, is easy to document. Just pull the historical data and run the tests in Excel. ("Been there, done that" many a time.)

Charlie
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