StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...

International Investing-IP3 - Essay Example

Cite this document
Summary
1) Portfolio diversification is a technique of reducing risks by allocating investments throughout different classes of financial instruments, industries and other relevant categories (Investopedia, 2011). Some investors use random diversification without taking into account investment characteristics such as return on investment or industry classification…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER98.8% of users find it useful
International Investing-IP3
Read Text Preview

Extract of sample "International Investing-IP3"

Download file to see previous pages

One way to diversify is to buy financial securities of the same asset class, but in different industry sectors that are directly affected by a different kind of variables (Yahoo, 2011). For example one can invest in stocks from the energy sector, while simultaneously investing in stocks of the computer technology related stocks. Since economic and market factors affect different industries differently, by investing in a variety of sectors, there is always a good chance of having one or more of your investments outperforming the market average.

Diversification also focuses on investing in different classes of assets. For example since bonds historically have a tendency to perform better when stock performance is declining it serves well for a savvy investor to allocate a percentage of their investment portfolio in the bond market depending on the investors level of risk aversion. 2) As many investors already know the market value of a security is determined by a variety of financial, market and socio-political factors. The volatility of the market value of investments is a risk all investors have to accept and plan for.

Since the world economies are becoming more interconnected and correlated changes in one market can spread like wildfire to other financial markets. Some argue that for U.S. investors the benefits of investing internationally might be less compared with other countries due to the wide variety of highly diversified multinational corporation stocks available to U.S. investors though local markets as a well developed and diversified economy. There is still a lot of room for the savvy investor to allocate part of its investment portfolio in the international markets especially in emerging markets or underdeveloped economies.

Even when due to their degree of correlation, international markets and domestic markets move in the same direction the degree of response to the same situation might be completely different. There are more opportunities for above average returns between emerging economies and industrialized nations since the level of correlation between them is much less. Therefore opportunities abound for extraordinary returns in international markets, albeit at the expense of an increased level of overall investment risks and potential losses. 3) There are many reasons to invest in international markets: Maximum portfolio performance - many investors shy away from investing internationally since they view it as too risky or complex.

As a matter of fact although most U.S. investors tend to focus their portfolio domestically, more than 75% of the global economic and over 50% of the total world’s equity market capitalization comes from the international markets (Ishares, 2011). As a matter of fact, international IPO’s now outnumber domestic IPO’s and while international investments are typically more volatile than their U.S. counterparts. They are forecasted to have higher rates of growth than their domestic counterparts.

Lower portfolio volatility-By investing in international securities investors can lower portfolio volatility and maximize their return on investment. The use of a single type of investment instrument increases the risk associated with the investment alternative. When investors invest in both the domestic and international markets they are opening the doors of opportunity due to the fact that the investor has the

...Download file to see next pages Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“International Investing-IP3 Essay Example | Topics and Well Written Essays - 1250 words”, n.d.)
Retrieved from https://studentshare.org/environmental-studies/1420993-international-investing
(International Investing-IP3 Essay Example | Topics and Well Written Essays - 1250 Words)
https://studentshare.org/environmental-studies/1420993-international-investing.
“International Investing-IP3 Essay Example | Topics and Well Written Essays - 1250 Words”, n.d. https://studentshare.org/environmental-studies/1420993-international-investing.
  • Cited: 0 times

CHECK THESE SAMPLES OF International Investing-IP3

Does Netscape Set the Technological, Social, and Financial Tone

The Internet community more than ten years ago was miniscule (57 million users according to the international Data Corporation) compared to what it is today, but even by then, it was growing by leaps and bounds.... At about the time of the initial public offering of Netscape Communications on August 1995, the Internet as a worldwide phenomenon was at the cusp of being born....
7 Pages (1750 words) Essay

Initial public offering (federal express) session long project module 1

The major completion for the company is from DHL international, United Parcel Services and United States Postal Service (FedEx, 2010).... The company was started in 1998, and over the years has grown to be present across the world.... The company lists on the NYSE and the stock of the company as of 14th January 2010 quote… The company employees as many as 140,000 people worldwide and the company have recorded sales of $35,497....
2 Pages (500 words) Essay

Investing in London Office Market

The case study under the title "Investing in London Office Market" states that This property investment has been prepared for a famous Asian high tech company that is interested in investing in the London office or commercial property for using and letting.... nbsp;… The London office market is highly attractive and is able to overcome different challenges and issues (Savills, 2012)....
13 Pages (3250 words) Case Study

The International Strategies of Petrobas

In its endeavor to serve the people of Brazil and the international market, the company has been able to set a number of records such as the world's deepest exploration well of about 2,853 m it dug in Roncador field.... The purpose of this paper is to examine the internationalization strategies employed by Petrobras....
12 Pages (3000 words) Essay

Integrated pest management

international, 2007).... international.... They are potential cause for farm revenue losses, product contamination as well as store damage.... Pigeons are common pest and usually nest… Integrated Pest Management (IPM) provides cost effective approach through which pigeons can be kept off a grocery store. Integrated pest management is an effective pest control method that is environmentally Integrated Pest Management Word Count: 547 Integrated Pest Management Introduction Pests are a major concern in all types of agriculture, especially in the present world where there is stringent environmental and food laws....
2 Pages (500 words) Assignment

Forms of Indirect Investing

The author states that indirect investment is an ideal option for capital investors who desire to invest in assets yielding long-term returns with low volatility and stable value.... The case study presented in the paper a better understanding of the indirect investment in practical life.... nbsp;… Kay, who is a divorced medical technician, is all on her own....
9 Pages (2250 words) Case Study

Investing in China

In the paper “Investing in China” the author looks at one of the fastest-growing economies in the world.... Foreign Direct Investment was one of the main pillars of economic reforms.... China's entry into the World Trade Organization has increased the opportunities for overseas companies to invest in China....
8 Pages (2000 words) Assignment

Capital Budgeting Process

The author examines the preparations which are made long before the actual IPO itself and involves three main participants: the issuing firm, the underwriter and the public.... The author states that the job of the chief financial officer to take all the necessary steps to make an IPO successful… The first is the support that can be extended by the underwriting syndicate by buying shares sold on the exchange so that prices will not go tumbling down....
4 Pages (1000 words) Assignment
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us