An Analysis Of An International Portfolio Investment

An Analysis of an International Portfolio Investment for Board of DirectorsNameCourseProfessor’s NameDateAn Analysis of an International Portfolio Investment for Board of DirectorsIt is common knowledge among practitioners that stock market investment is a risky venture. Both theoreticians and practitioners advise holding a well-diversified portfolio in order to reduce risks. Even though mutual funds offer a relatively inexpensive and quick way to diversify, risk reduction is also possible and recommendable through international diversification (Madura, 2012).This is the process commonly known as foreign portfolio investment, involves a company purchasing stocks and bonds from another company in a different country. It is a cross-border financial trading, specifically for financial gains. Generally, portfolio investment goes with trading in highly liquid securities, which means they can be quickly bought and sold. Most of portfolio investors are not interested in the management of a company, which is a direct contrast of direct investment that allows investors to exercise some level of managerial control over a company (Madura, 2012).Reduction of risk via geographic diversification and higher rates of returns are two main influencers of foreign portfolio investment. As the CEO of