Question

What are the benefits of international diversification?

Answer 1

The benefits of international diversification are:

1. Benefit of diversification: Diversification helps in minimizing risks occurred due to one asset. When we put our capital in different assets, we tend to distribute our risk among different assets, where the failure of one asset will not harm us that much.

2. Market integration: The development of international firms raise our profits. The reason can be as simple as Information technology. The regulation relaxation can help in developing the market for a firm.

3. The markets across the world are becoming more integrated hence the profits will maximize in the long run.

4. Interdependencies among markets help the diversification and hence staying connected with the international markets. This results in reduced risks of portfolio.