Why is investing in foreign companies an effective way to diversify an individual's investment portfolio?
A)Foreign economies are stronger than the U.S.economy.
B)Foreign stocks are less risky than the stocks of U.S.corporations.
C)Stock returns of companies in foreign companies are highly correlated with stock returns of U.S.companies.
D)Returns on foreign company stocks do not always change in the same direction as returns on U.S.stocks.

Question

Quizplus · Accepted Answer

Investing in foreign companies is an effective way to diversify an individual's investment portfolio because the returns on foreign company stocks do not always change in the same direction as returns on U.S. stocks. This means that if the U.S. stock market experiences a downturn, an individual's portfolio may still perform well if they have invested in foreign companies that are not affected by the same factors. This can help to reduce overall risk in the portfolio and potentially increase returns.

Why Is Investing in Foreign Companies an Effective Way to Diversify