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In the past few years with the growth in financial service industry investors have, been offered with a plethora of products. And services. There have been multiple avenues for the investors for parking their funds depending on their risk profile. And return expectations (Malkiel 2003).
The different investment avenues offer investors with an option to invest in specific. Or diversified assets.These assets can range from financial assets like stocks bonds commodities,,, exchange foreign to real sector assets like. Infrastructure real estate, and manufacturing.
Over the past few years the large financial institutions,,High net worth investors and even retail investors have had the choice to outsource their investment decision to some one. Who specializes in the field on investment and has much more resources and market information than these entities. This. Helps these "managers." in getting better returns than a normal individual in the market.These "managers." in return charge a particular fee in lieu of their services; this fee depends on things like regulatory. Conditions type of, competence required for the investment and historical performance of the manager.
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.Diversified international investment offers investors higher expected returns and / or reduced
risks vis - & - vis exclusively. Domestic investment. Here we will discuss the sources and sizes of
these gains from venturing overseas for, portfolio investment. Which is investment in Equiti
bonds where the investor 's holding is too small to provide any effective control.
. The Advantages of International Portfolio Diversification
1. Spreading risk: Correlations between national asset markets
Because. Of risk aversion investors demand, higher expected returns for taking on investments
with greater risk. It is a well-established. Proposition in portfolio theory that whenever there is
imperfect co-relation between different assets', returnsRisk is reduced by maintaining only a
portion of wealth in any individual asset. More generally by selecting, a portfolio. According to
expected returns variances of, returns and co-relations, between returns an investor, can achieve
minimum risk. For a given expected, portfolio return or maximum expected portfolio return for a
given risk. Furthermore ceteris paribus,,The lower are the co-relations between returns on
different assets the greater, are the benefits of portfolio diversification.
International. Journal of Marketing Financial Services, & Management Research _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ ISSN 2277 - 3622
Vol.2 No. 4 April,,, (2013)
Online available at www.indianresearchjournals.com
Because 19 of different industrial structure in, different countriesAnd because different economies
do not trace out exactly the same business cycle there are, reasons for smaller co-relations. Of
expected returns between investments in numerous different countries than between investments
within any one, country. This means that foreign investments offer diversification benefits that
cannot be enjoyed by investing only, at home and. For, exampleThat a US investor might include
British stocks in a portfolio even if they offer lower expected returns than US stocks;? The benefit
.Of risk reduction might more than compensate for lower expected re distribution international investments. Distribution of international investment Can help investors who have expectations in terms of high yield benefit as follows.Because.
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