Chartered Investment Manager (CIM) Practice Exam · Question
Why is international diversification often recommended for Canadian investors?
International diversification helps reduce portfolio risk by combining investments from different countries whose economic cycles and market movements are not p
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Question: Why is international diversification often recommended for Canadian investors?
Answer options:
- To entirely eliminate currency risk. ✅ To reduce overall portfolio risk by investing in markets with low correlation to the Canadian market.
- To guarantee higher returns than those available in the domestic market.
- To avoid all regulatory oversight from Canadian authorities.
Correct answer: To reduce overall portfolio risk by investing in markets with low correlation to the Canadian market.
Explanation: International diversification helps reduce portfolio risk by combining investments from different countries whose economic cycles and market movements are not perfectly correlated with Canada's.
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