Option b is correct. When an investor adds international stocks to his or her U.S. stock portfolio, he or she can reduce the risk of his or her portfolio.
A portfolio that concentrates on overseas markets rather than domestic ones is made up of stocks and other assets. An international portfolio can provide diversification and exposure to both emerging and developed markets if it is properly constructed.
An investor who wants exposure to the stocks of economies growing faster than the U.S. may find an international portfolio appealing.
By combining shares of some of the top performers in the industrialized world with emerging-market stocks, the risks of such a strategy can be minimized.
The investor might also take a look at some of the American businesses that are expanding quickly abroad.
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