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University of Phoenix Class Fin/402

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Submitted By gameand1
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Week 5: Investment Enhancement Paper
Robert L. Cole
FIN/402 Investment Fundamentals and Portfolio Management
November 11, 2013
Richard E. Smith

Composition of investment portfolios is a complicated process involving rigorous methods ensuring successful financial transactions aimed at financial stability and profitability. Selection of appropriate asset classes are only half the task, revision is the other crucial element needed to complete the process of excellent portfolio performance. Portfolio diversification assists investors’ exposure to risk in both domestic and international markets, and is a notably significant component regarding the composition of a portfolio. An investor must comprehend all investment vehicles because alternatives might become necessary after mediocre portfolio performance evaluations. In addition, derivative securities can further enhance portfolio performance; therefore, careful consideration of these assets must be taken seriously with regards to the composition and revision of an investment portfolio.

Diversification of any portfolio, whether it is domestic or international, is extremely important because having assets with different characteristics allows investors the potential of a differentiated level of risk. Risk reduction through international diversification pertains to international market correlations increased after unexpected shocks. The implication of diversification benefits are reduced after unexpected travesties; therefore tests of stability of market correlations movements are based on before and after analyses of tragic events. It has been recommended to investors by professional financial experts to incorporate foreign equities into their portfolios. Specific market conditions; such as, “globalization aided by advances in communication technology,

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