Question

As a saudi citizen / resident, would you rather invest in a US government bond or in a saudi private large corporation bond? Provide a detailed answer by discussing advantages and disadvantages of each option.

Answer 1

If you are a citizen of one country and looking to invest in International markets, there are many things that needs to be taken care of not just the return from investment but also other implications like the appreciation or depreciation of currency, Tax implication, the broker or the route of investment. You have to make sure that all the process is reliable and not fraud. If you are looking to invest in US government bonds that means you are looking for safety of the bond because treasury bonds do not provide high yield, so if you are looking for high liquidity and safety of investment while generating decent return then you should certainly invest in US government bond. There is very less default risk. Your investment will have higher liquidity than other bonds and may be even more than the Large corporate bond in Saudi Arabia. The disadvantage of this investment is you have to understand the tax implication as to what is the after-tax return from the investment including the transaction cost because if after transaction and tax cost it is not worth then you should choose to invest in your country. You also have to look at it from the perspective of the currency exchange rate movement, an unfavorable move can eliminate your return and leave you with negative return in your currency.