An analysis of international portfolio diversification and alternative investment vehicles as methods to enhance an investment portfolio.
Written in 2005; 864 words; 3 sources; APA; $ 30.95
Paper Summary:
This paper discusses some of the numerous strategies and techniques that exist in which an investor may enhance his or her investment portfolio. It looks at simple and complex techniques. The paper focuses on international portfolio diversification and alternative investment vehicles as methods to use in order to reduce risk while maximizing a portfolio's performance.
Outline:
International Portfolio Diversification
Alternative Investment Vehicles
Convertible securities
Use of Derivative Securities
Conclusion
From the Paper:
"International Portfolio Diversification is a viable strategy in terms of maximizing the performance of an investment portfolio. According to Bruno Solnik, "A well-diversified international portfolio can achieve the same risk-reduction benefits as a pure U.S. portfolio that is twice the size in terms of securities." (Solnik, 1974, pp. 48-54) The ability to minimize unsystematic risk with a much smaller portfolio certainly makes sense. Additionally, while many people view international investments as inherently risky, this risk may be diversified away just as easily as with U.S. securities."
"Another appealing fact when considering international portfolio diversification is that international securities may not be subject to some of the same systematic risks as securities in the United States. An unforeseen negative event in the local markets may have no effect on an international security; and may in fact have just the opposite effect. Granted, certain systematic risks may be common to multiple, or all, countries; however, by diversifying internationally, an investor is further hedging against risks that may be particular to a given country or region."
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