International diversification

VIDEO

Investors’ portfolios are often overallocated into local products. Investing in products that provide international exposure is an important strategy that has the potential to offer different return sources and help to mitigate volatility and lower risk.

Learn more below

What is meant by international diversification?

To diversify is to choose financial instruments having different characteristics so they may show diverse responses to market stimuli, with the final purpose of mitigating the overall portfolio risk, as less favorable responses of some assets will be compensated with those more favorable of others. International diversification moves a step further incorporating not only assets with different behaviors, but also assets located in various countries so the response range is yet broadened.

Why diversify? Combining non-correlated assets – that is, assets with behaviors that are not linked to one another – may provide, in time, a less volatile and lower-risk portfolio. Additionally, an international diversification strategy may offer return sources different to those obtained from local investing, thus allowing risk to be distributed along markets as well as on global companies.

Predicting with certainty the kind of assets that will have the best returns on each period of time has proved to be quite impossible. However, a diversified portfolio smoothens market peaks allowing for more stable results. Moreover, international diversification may provide access to return sources not present in the local market, admitting the potential capture of additional benefits.

What is meant by international diversification?

To diversify is to choose financial instruments having different characteristics so they may show diverse responses to market stimuli, with the final purpose of mitigating the overall portfolio risk, as less favorable responses of some assets will be compensated with those more favorable of others. International diversification moves a step further incorporating not only assets with different behaviors, but also assets located in various countries so the response range is yet broadened.

Why diversify? Combining non-correlated assets – that is, assets with behaviors that are not linked to one another – may provide, in time, a less volatile and lower-risk portfolio. Additionally, an international diversification strategy may offer return sources different to those obtained from local investing, thus allowing risk to be distributed along markets as well as on global companies.

Predicting with certainty the kind of assets that will have the best returns on each period of time has proved to be quite impossible. However, a diversified portfolio smoothens market peaks allowing for more stable results. Moreover, international diversification may provide access to return sources not present in the local market, admitting the potential capture of additional benefits.

Learn more about international investing

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INTERNATIONAL DIVERSIFICATION

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