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Investment Enhancement - Essay Example
Finance & Accounting
Pages 4 (1004 words)
Investment Enhancement Name: Instructor: Institution: Investment Enhancement Introduction The thought of investing in a number of countries is promising and rewarding. It is likely to lessen the risk connected to stock marketing investing for a probable level of projected return by diversifying in all areas of the world…
This will help business people have adequate international portfolio diversification. Moreover, shareholders yearning to diversify a precarious investment, for example, stocks in a developing market, via international diversification, would be more profitable in areas which are negatively correlated, as well (Markowitz, 1952). Nations with stock prices moving in a different direction are perceived to be negatively correlated, while states with stock prices moving in a similar direction are perceived to be positively correlated. The principle of diversification stipulates that a portfolio comprising largely positively correlated benefits embrace the portfolio al an advanced risk than a negatively correlated stock prices portfolio. Lack of precise fortitude of stock market price progress keeps all portfolios at an advanced risk level than anticipated because of the existence of a diversifiable risk (Markowitz, 1952). This paper will look into the impact of international portfolio diversification on an investment portfolio, investigate alternative investment vehicles, and explain how the use of derivative securities can further enhance a portfolio’s performance. ...
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