A) International portfolio diversification reduces the volatility of an investment portfolio
B) International portfolio diversification increases the risk of an investment portfolio
C) There is no impact of international portfolio diversification on the volatility of an investment portfolio
The correct answer is A.
International portfolio diversification reduces the volatility of an investment portfolio by allowing investors to spread their risk across a broader range of assets. This diversification can help to protect against losses in any one particular asset class or market, as the performance of the overall portfolio is less likely to be impacted by a single event.
Other related questions:
Q: Which of the following is true of portfolio diversification?
A: Portfolio diversification is a way to manage risk by investing in a variety of different assets. This strategy can help to protect against losses in any one particular investment.
Q: What is international portfolio diversification?
A: International portfolio diversification is the process of investing in a variety of assets from different countries in order to mitigate risk and maximize returns. By investing in a variety of assets, investors can reduce the overall risk of their portfolios as well as take advantage of opportunities in different markets.
Q: What are some benefits of a portfolio that is internationally diversified?
A: Some benefits of an internationally diversified portfolio include:
1. Diversification can help to reduce risk. By investing in a range of different asset classes and geographical regions, you can spread your risk and potentially reduce the overall volatility of your portfolio.
2. An internationally diversified portfolio can offer opportunities for higher returns. By investing in a range of different asset classes and geographical regions, you can access a wider range of investment opportunities, which may offer the potential for higher returns.
3. An internationally diversified portfolio can provide access to a wider range of investments. By investing in a range of different asset classes and geographical regions, you can access a wider range of investments, which can provide you with greater diversification and potentially higher returns.
Q: Why is portfolio diversification important?
A: There are a few reasons why portfolio diversification is important.
First, diversification can help to mitigate risk. By investing in a variety of assets, you can help to protect yourself from losses if any one particular investment performs poorly.
Second, diversification can also lead to higher returns. When you invest in a variety of assets, you are able to take advantage of different opportunities and potentially earn a higher return on your investment.
Lastly, diversification can help to make your portfolio more efficient. When you diversify your portfolio, you are able to rebalance your investments and ensure that you are properly allocated across different asset classes. This can help you to earn a higher return while taking on less risk.