International investing is something that many investors find that they can benefit from for many reasons. Two of the main reasons why investors choose to invest in foreign markets are growth and diversification. Growth allows investors the potential to take advantage of new opportunities in foreign emerging markets. International markets can potentially offer opportunities that might not be available in the United States. Diversification allows investors to spread out their risk to different markets and foreign companies other than those just in the United States allowing them to potentially create larger returns on their investment as well as reducing risks. (U.S. Securities and Exchange Commission, 2012) While investing internationally can be a very lucrative and rewarding decision, there are also extra risks involved with investing internationally. One of the main risks that international investors encounter is foreign exchange risk also known as currency risk. Currency risk is a financial risk that is created by contact with unforeseen changes in the exchange rate between two currencies. These changes can cause unpredictable gains or losses when profits from investments are converted from a foreign currency to the United Stated dollar. There are precautions that can be taken by investors to potentially lower their risk of currency value fluctuations and other risk factors that are present in international investing. (Gibley, 2012) Why Invest Internationally? Some investors are wary about the process of investing internationally, carrying the concept that it is always to precarious and complex. While there are risks involved with international investing, there are also very beneficial and profitable reasons for doing so. Ev... ... middle of paper ... ... M. (2012, July 24). Why Invest Internationally? Schwab.com. Retrieved February 14, 2014 from http://schwab.com Parto, C. (2012, March 8). Protect Your Current Investments from Currency risk. Investopedia.com. Retrieved February 14, 2014 from http://www.investopedia.com/articles/forex/08/invest-forex.asp Kuiper, J. (2011, May 18). What Is Currency Risk? About.com. Retrieved February 14, 2014 from http://internationalinvest.about.com/od/foreigncurrencies/what-is-currency-risk.htm Nguyen, J. (2011, September 8). The 3 Biggest Risks Faced By International Investors. Investopedia.com. Retrieved February 25, 2014 from http://www.investopedia.com/articles/basics/11/biggest-risks-investors-face.htm U.S. Securities and Exchange Commission. (2012, August 14). International Investing. SEC.gov. Retrieved February 25, 2014 from https://www.sec.gov/investor/pubs/ininvest.htm
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The purpose of this paper is to provide a summary of the article called “Can We Keep Our Promises?” by Robert D. Arnott, and to help better understand the three key risks facing each investor.
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