American investors have several alternatives available to diversify their portfolios internationally.In terms of transaction costs, which of the alternatives below is least attractive?
A)mutual funds with an international focus
B)stocks of U.S.based companies with extensive foreign sales and/or operations
C)direct investment in foreign stocks
D)American Depositary Shares

Question

Quizplus · Accepted Answer

Direct investment in foreign stocks involves higher transaction costs than the other alternatives listed. This is because investors will typically have to go through a foreign broker to purchase foreign stocks, which may result in higher fees and commissions. Mutual funds with an international focus, stocks of U.S. based companies with extensive foreign sales and/or operations, and American Depositary Shares are all options that allow for international diversification while keeping transaction costs relatively low.

American Investors Have Several Alternatives Available to Diversify Their Portfolios