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International Portfolio Diversification

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More Opportunities from Globalization

Domestic portfolio concentrates on a few opportunities, into which an investor would venture. This limits them to the opportunities that are available in their country (Sellin & Werner, 1993). With the increasing rate and scope of globalization on all fronts, more opportunities are coming up in developed countries. Investors are able to invest in ventures that are not available in their home countries, which give them an upper hand ahead of investors, who have domestic portfolios. This provides a platform for the smaller economies to identify financial opportunities that may not be available in their home countries.  This eventually results in higher and more stable returns as opposed to domestic portfolio (Sellin & Werner, 1993).

Reduced Risks

Global or international portfolio has a wider scope and a better mechanism to reduce any form of risks that investors might face. Among the fundamental principles of business, there is a reduction of any chances that the investor would lose his capital (Wei & Gelos, 2005). Global or international currencies are stronger than a domestic currency.  While a single country can experience a financial difficulty, which does not affect any other country, the same would rarely affect the whole world. It takes more factors to affect negatively the global portfolio than it would to affect a domestic portfolio. When investments are made on an international portfolio, they would be safer than when done from a domestic portfolio. Investors make ventures in stocks that have low correlation in comparison with their domestic stocks.

Assured Currency Stability

International portfolio uses a uniform currency that allows any country to trade with high returns as compared to the use of their own currency (Wei & Gelos, 2005). When one currency may get unstable, international portfolio ensures that the currency they use remains stable, thus assuring the flow of returns. At the same time, more stable currencies assist the overall traders to keep the currency unchanged. Domestic currencies are often affected by ‘small’ issues that would not affect the international currency (Sellin & Werner, 1993).

Global Funds

This global fund strives to ensure that their investment achieves a maximum possible capital growth. It was established in 1993 and at least 65% of the fund’s assets are invested in a minimum of three different countries. These investments have to be made in the US, among the three countries. Eighty percent of the investments are made in the form of common equity, convertible securities, preferred equity, depository receipts and in derivatives. The fund invests in emerging markets that seem appealing.

Templeton Global Smaller Companies Fund has been in existence for over 70 years, helping smaller companies to invest with a global outlook. It is pegged on the belief that global ventures are unlimited due to the highly diverse society in almost all aspects. This presents more opportunities thus higher returns. The global outlook is further cemented by their long-term capital investment. It helps small companies located in almost all parts of the world, and the investments are made in at least three different countries.

Oppenheimer Global Opportunities - this fund is a good representative of a fund that provides an opportunity for the capital growth. It further represents a constant income flow. Having been in existence from 1990, the fund has concentrated in debt securities as well as in equities that are located inside the US and outside of it. It focuses on the global market because despite being located the United States, most of its assets and invests are placed outside the US. Its focus is in the purchase of stocks, but options of investment in debt securities, where the market looks favorable, is a common investment.  It also has been introduced in emerging economies and developed ones in America and Europe. Its investment has spread in four countries so far.

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