EITHER THE INDIVIDUAL OR THE CORPORATE INVESTOR?

All investments are subject to risk. What diversification does is to spread the risk across different assets and in the case of international diversification, across different economies operating in different countries. It does not guarantee profit or a perfect protection against the possibility of a loss and inherent risk. Aside the risks faced by domestic investors, international investors have to contend with the possibility or risk of foreign exchange uncertainties and political uncertainty. These uncertainties and inherent risk have led to many investors shying away from engaging in international investment diversification. In 1997, U.S investors invested 91 % of their stock domestically even though U.S stocks represented only 49 % of global market portfolio. However the benefits of international investment diversification are real. This paper investigates the benefits against the risk for corporate and individual investors. Investors are gradually increasing their international portfolios. There is the benefit of a substantial reduction in risk if investors diversified internationally since correlation is very low The paper finds that international diversification is prudent for both individual and corporate investors due to its ability to maximize returns and lower risk. The fact that internationa