Chartered Investment Manager (CIM) Practice Exam · Question
What is the primary benefit of international diversification for a Canadian investment portfolio?
International diversification helps reduce overall portfolio risk by combining assets that do not move in perfect sync, leveraging potentially lower correlation
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Question: What is the primary benefit of international diversification for a Canadian investment portfolio?
Answer options:
- To reduce currency risk exposure within the portfolio.
- To concentrate investments in the highest-growth economies globally. ✅ To reduce overall portfolio risk through exposure to assets with low correlation to domestic markets.
- To primarily increase direct dividend income from foreign companies.
Correct answer: To reduce overall portfolio risk through exposure to assets with low correlation to domestic markets.
Explanation: International diversification helps reduce overall portfolio risk by combining assets that do not move in perfect sync, leveraging potentially lower correlations between various global markets and asset classes.
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