Why is investing in foreign companies an effective way to diversity 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 returns on foreign company stocks may not always change in the same direction as returns on U.S. stocks. This provides a hedge against market fluctuations and reduces overall portfolio risk. Additionally, investing in foreign companies allows an individual to take advantage of growth opportunities in different economies and industries, which can lead to higher returns over the long term.

Why Is Investing in Foreign Companies an Effective Way to Diversity