Individual 3 international trade operation Essay

item-by-item 3 world(prenominal) trade operation - Essay Example crap. However, when investing in the planetary market, Mr. Samson should be prepargond to deals with challenge of stiff competition from the outside(a)istic firms (Choudhury, 2012). Therefore, this study will provide an cleverness of various elements that Mr. Swanson should take into consideration when investing in the international markets. What is portfolio diversification? Explain why ar opposed investments effective at commuteing a portfolio? Portfolio diversification entails hedging risk by investing in various assets/portfolios. This means that a diversified portfolio will expose an investor to less risk as compared to a single investment. For example, if one investment is performing poorly in the market the other one talent be performing well hence, distributing risk unlike in a situation where one has invested in single portfolio. Therefore, investors are strongly urged to invest wisely by diversifying their portfolio (Hagin, 2004). In above connection, foreign investments ingest been reported to be effective at diversifying a portfolio due to the following reasons. There is well advance level of information technology that enables investors to track their investments and market trends as well as promotion of thought exchange. International market tends eradicate foreign exchange controls and hence making it quit effective to diversify portfolio, higher(prenominal) offshoot and proper flow of international capital makes it effective to diversify portfolio in the international market. Development of both multinational and global companies had made it easier and effective to diversify a portfolio in the international market. Trade deregulation in the international market has made it effective for portfolio diversification within the international market (Yavas, 2007). What are the main reasons to invest in international markets? Explain. The main reasons to invest in internatio nal market include risk reduction. For example, if one has investments in Japan and the other one in the U.S, economical down town in U.S may only affect an investment that is in the U.S but non the one in Japan. This means that investing in the international market prevent one from incur greater risk. Secondly, international markets provide an investor with greater investment opportunities. For example, international market provides investors with an opportunity to trade stocks with higher value as compared to those offered in the domesticated market and hence, providing an investor with higher returns (Gibley, 2012). Thirdly, an international market has higher growth potential as compared to domestic market. This provides an investor with an opportunity to take advantage of potential growth in the foreign markets. Fourthly, International Markets provides an investor with an added advantage because international companies can help to boost returns especially when there is fluctu ation of domestic currencies. For example, an international investor may obtain more returns when there is a decline in the value of dollar mark while on the contrary a domestic investor may obtain losses. Therefore, the above benefits can lede an investor to venture in international market (Gibley, 2012). What are the major risks associated with investing internationally? There are three most common risks that may be experienced when investing in the