Question

Diversifying among stocks based in countries outside the United States

A) makes your portfolio less vulnerable to conditions in the United States.
B) is too expensive to use as a means of diversification.
C) makes your portfolio's returns less volatile because foreign stocks are less volatile than U.S. stocks.
D) is too risky for individual investors to consider

Answer 1

Diversifying among stocks based in countries outside the United States can make your portfolio less vulnerable to conditions in the United States. It is not necessarily too expensive to diversify internationally. Foreign stocks can contribute to making your portfolio's returns less volatile.

Step-by-step explanation:

Diversifying among stocks based in countries outside the United States can make your portfolio less vulnerable to conditions in the United States. By investing in foreign stocks, you are spreading your investments across different markets and reducing the impact of any negative events that may occur in the US market.

It is not necessarily too expensive to diversify internationally. There are various options available for investors to access foreign stocks, such as mutual funds and exchange-traded funds, which offer diversification at a lower cost.

Foreign stocks can indeed contribute to making your portfolio's returns less volatile because foreign stocks may have different performance patterns compared to US stocks. This diversification can help offset the volatility of US stocks, leading to a more balanced and stable overall portfolio.