Financial Education

When investing or considering investments in International assets, investors should consider the following special issues:

Currency risk: This affects both return and volatility. Investors must decide whether to hedge this risk.

Correlations with other assets: Although international assets frequently have low correlations with domestic assets, the correlations increase during times of stress. Times of stress are exactly the times in which a low correlation (higher diversification benefit) is most needed.

Emerging markets: Emerging markets tend to be less liquid and less transparent than developed markets. Their investment return distributions tend to be non-normal, which is significant for investors employing mean-variance optimization strategies.

For more information, see all articles on: Asset Allocation, FInancial Planning, International Investing, Investment Returns, Portfolio Management

See also:

Translating the Financial Statements of a Foreign Subsidiary in a Hyperinflationary Economy

Postretirement Obligations

Determining Inventory Cost

Unusual or Extraordinary Items

Upward Revaluation of Assets