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Essay / Research Paper Abstract
This 5 page paper looks at why international investment may be attractive to investors. Advantages such as diversification of risk and potential tax advantages are discussed. The risks, such as exchange rate fluctuations, are also considered. The bibliography cites 3 sources.
Page Count:
5 pages (~225 words per page)
File: TS65_TEinterinvest.doc
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Unformatted sample text from the term paper:
are also accompanied by risks. To look at the aspects of international investment and explain the potential for risks and rewards it is necessary to look at both the potential
benefits and the potential difficulties and risks. Investing in international markets involves investing money outside of the home nation markets. The reasons to look to international markets are numerous;
these include diversification of risk, growth opportunities and tax advantages (Howells and Bain, 2007). One of the most common motivations for international investment is diversification with the aim of
reducing risk. Diversification occurs in a portfolio where there are a variety of investments. The concept of diversification is simple; the spread of money over different investments reduces the exposure
of the money to specific risks (You and Daigler, 2010; Howells and Bain. 2007). For example, if a portfolio has $1 million invested in one firm only, and that firm
folds, all the money is lost. If the same portfolio invests equally in 20 firms rather than only one firm, and one firm folds, the portfolio will only loose 1/20th
of the total amount invested (in this case $50,000). By investing across a number of firms the risk has been spread. With the spread of investment some investments may perform
poorly, but others may compensate for this with growth. This is the concept of diversification. International investment provides a way of diversifying; rather than simply investing in diverse companies
in different industries in the same country, it is possible to invest in different companies in different countries. In any investment environment there will be different risks, some may relate
specifically to the individual company, some may relate to specific industries and some are reflective of the overall national economy, investments across different economies will inherently spread risk associated with
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