Question

Identify and describe a country other than the United States that you believe would be a wise addition for someone seeking portfolio diversification. This will require some time and research, so to avoid duplication with a classmate, post which country you will be researching on BlackBoard prior to completing your full post.

My Answer

Why Mexico? I chose this country because I know the growth potential and how how the risk and return play part in many different projects that are happening in the country. From Housing, Building warehouses and factories... To Many investors choose to place a portion of their portfolios in foreign securities. This decision involves an analysis of various mutual funds, exchanges trade funds (ETFs), or stock and bond offerings. However, investors often neglect an important first step in the process of international investing. When done properly, the decision to invest outside of the united states begins with determining the riskiness of the investment climate in the country under consideration. Country Risk refers to the economic, political and business risks that are unique to a specific country, and that might result in unexpected investment losses. This article will examine the concept of country risk and how it can be analyzed by investors.

Economic and Political Risk -Two main risk sources need be considered when investing in a foreign country:

Economic risk: This risk refers to a country's ability to pay back its debts. A country with stable finances and a stronger economy should provide more reliable investments than a country with weaker finances or an unsound economy.

Political risk: This risk refers to the political decisions made within a country that might result in an unanticipated loss to investors. While economic risk is often referred to as a country's ability to pay back its debts, political risk is sometimes referred to as the willingness of a country to pay debts or maintain a hospitable climate for outside investment. Even if a country's economy is strong, if the political climate is unfriendly (or becomes unfriendly) to outside investors, the country may not be a good candidate for investment.

Developed markets consist of the largest, most industrialized economies. Their economic systems are well developed, they are politically stable and the rule of law is well entrenched. Developed markets are usually considered the safest investment destinations, but their economic growth rates often trail those of countries in an earlier development stage. Investment analysis of developed markets usually concentrates on the current economic and market cycles; political considerations are often a less important consideration. Examples of developed markets include the U.S., Canada, France, Japan and Australia.

Emerging markets experience rapid industrialization and often demonstrate extremely high levels of economic growth. This strong economic growth can sometimes translate into investment returns that are superior to those available in developed markets. However, emerging markets are also riskier than developed markets; there is often more political uncertainty in emerging markets, and their economies may be more prone to excessive booms and busts. In addition to carefully evaluating an emerging market economic and financial fundamentals, investors should pay close attention to the country's political climate and the potential for unexpected political developments.

http://www.nextavenue.org/how-adding-riskier-investments-can-make-your-portfolio-less-risky/

YOUR CONTRIBUTION ON WHY MEXICO