Question

International investment diversification Personal Finance Problem The economies of the world tend to rise and fall in cycles that offset each other. International stocks can provide possible diversification for a portfolio heavy on U.S. equities. Because research on foreign companies is usually difficult for individual investors to track on their own, a foreign equity mutual fund offers the investor the expertise of a global fund manager. Foreign-stock funds provide exposure to overseas markets at varying levels of risk. Economic and currency risk can swing in a positive or negative direction. Hence, diversification is the key to managing risk. Funds that invest overseas fall into four basic categories: global, international, emerging-market, and country-specific. The wider the reach of the fund, the less risky it is likely to be. Brief explain the differences between the four funds. Which of the following funds has enormous growth potential, but also poses significant risks? (Select the best answer below.) O A. Global fund O B. International fund O C. Emerging-market fund O D. Country-specific fund

Answer 1

Emerging market funds invest in emerging markets like China, India etc.

These countries amazing growth potential than compared to the rest of the world.

Looking at the stats:
The Sensex Index Fund has an average return of more than 16% p.a in 40 years.

It has gone from ₹100 to ₹40,500.
Taking factors like foreign exchange into consideration it will still be more than 12% in local currency like the USA. It shows the amazing growth potential of Amazing of the emerging markets.

Answer: C. Emerging market funds.