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Assignment for the subject "PORTFOLIO ANALYSIS", of my course "Accounting and Financial Management". Writer MUST be ON TIME. - Essay Example
Author : owaelchi
Pages 5 (1255 words)
International diversification has been found to be very beneficial for portfolio investment. There are several ways by which international diversification especially the countries favourable for investment growth is preferable over domestic diversification…
For example, if an investor purchases some shares in his home country i.e. and also includes in his portfolio a number of shares from international countries like the United States and European countries, the risk associated with both the investments i.e. domestic and international diversification would be different based upon the various political, economic and investment factors. Thus depending upon the condition of stock markets in every single country in the portfolio, the risk will be diversified ensuring a high rate of return on investment.
Fig 1 shows the comparative statistics of stock market indexes of three countries i.e. the United States and the two European countries i.e. Germany and Poland. If we suppose that an investor from UK diversifies his portfolio of investments in the stock market of these three international countries. The differences in the statistics shown in the Fig1 propose that the level of risk and return would certainly vary from country to country that will ensure maximum returns for investors.
International portfolio diversification is highly beneficial in a situation where the stock exchanges, economic condition and political environment of international countries are highly different from each other. ...