INTERNATIONAL PORTFOLIO

International Portfolio



International Portfolio

Introduction

International portfolio is the investment that focuses on the foreign market securities rather than the domestic one. This portfolio is intended to give the investor growth exposure in upcoming markets and international markets and hence offer diversification. The benefit of International portfolios is the diversification and hence comprise of risk due to the potential economic instability stemming from emerging markets. Furthermore, through investment in industrialized and more stable markets can contribute towards the stability of the investments.

In this paper we will see how a fund manager for a multinational firm increases the valuation of the company by 10 percent through international investment (portfolio of international investment) and the strategies, construction, management and country risk are involved in the international portfolio investment.

Discussion

The removal of exchange controls and moderation of regulations on banking and financial activities have enabled investors to diversify their investments globally. The major beneficiaries of this capital inflow are mainly developed countries. The United States also attract a large proportion of international investments to finance their budget deficits and current account.

Stocks V Bonds

According to studies the variability in portfolio is 77% and 94% has been determined by the allocation of assets. Hence, we have selected who has securities (asset classes) with low correlation in order to get best risk and reward ratios. The graph below indicates the risk and returns tradeoff between bonds and stock with the S&P 500 index while bond contain 40% five years Treasury bonds.

How Much Risk Should You Take

Now to decide how much risk to take, we will determine the asset allocation in terms of years and to see the risk that can be tolerated.

Correlation

In my opinion, I think the use of the correlation coefficient can be useful in the Value Investing in some cases. This ratio can help us in optimizing our portfolio diversification if we choose stocks with low correlation coefficient. This statement may be debatable, so we must look at the problems of the correlation coefficient as a guide when to diversify in the Value Investing. In order to increase the value of the firm by 10% given the sum of £100 million to obtain the objective, I have chosen 40% of the amount to be invested in the Bonds of US and 60% in the shares that are trading on the stock exchanges.

Purpose of investment in U.S and Euro

The Eurobond market is a large distribution network and exchange that connects issuers and investors from around the world on a decentralized market without strict regulation. Eurobonds now account for three quarters of the total volume of international bond issues. This growth has contributed to the standardization of broadcast agreements and mechanisms of interest payments and settlement, which have kept down the costs of issuance. Emissions trading of Eurobonds are flexible and competitive and not subject to high transaction costs typical of national markets that are highly regulated (uk.finance.yahoo.com).

The reason to invest in the U.S. stock market is due to the high exposure of shares ...