international portfolio diversification
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1.) What are some effects of international portfolio diversification on an investment portfolio?
2.) What are some alternative investment vehicles?
3.) How might derivative securities further enhance a portfolio's performance?
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1.) What are some effects of international portfolio diversification on an investment portfolio?
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1.) What are some effects of international portfolio diversification on an investment portfolio?
International portfolio diversification is a strategy which is commonly pursued by today's investors due to increasing ease and options available to invest in global financial markets and different types of global financial instruments. Although the benefits of international portfolio diversification are being increasingly debated, particularly as financial markets are increasingly becoming correlated due to increasing bilateral trade and dependency among nations, it can still be safely said that international portfolio diversification provides numerous benefits to an investor.
First of all, the main advantage is access to growth opportunities across the globe. International portfolio investments allow an investor to tap on high growth and return opportunities in several developed and emerging markets across the world. For example, in the last few years, emerging markets such as China, India and Brazil have outperformed other markets due to their strong GDP growth, booming capital markets and rising inflow of investments in their capital markets. Investors have enjoyed higher returns by investing in emerging markets related securities. Even though the financial markets across the globe are highly correlated, higher returns are still available for investors in several developed and emerging markets across the world in instruments ranging from emerging market equities, bonds, etc.
Secondly, international portfolio diversification helps an investor to spread the portfolio ...
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- BCom, SGTB Khalsa College, University of Delhi
- MBA, Rochester Institute of Technology
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