Globalized Portfolios

Globalized Portfolio Risks
Globalized portfolios have been a way in which new growth opportunities can occur for investors. Globalized portfolio investing is a type of investment that is typically easily traded, can be less permanent, and often times does not represent a controlling stake in an enterprise (Levin Institute, 2012). Investments can be represented in stocks or bonds and typically take form in a type of interest payment or non-voting dividends. For a country that is on an uphill trend, globalized portfolios can be a rapid source of development to help the economy that is emerging move quickly in order to take advantage of potential economic opportunity that can create wealth and job opportunity (Levin Institute, 2012). When economic
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With an increased scale of global opportunities, there is also an increase in the level of risk presented. This can range and fluctuate from interest and exchange rates to possible supply chain piracy (Lopes, 2013). With increased strategic measures, often times it involves increased levels of uncertainty. This can ultimately lead to impact on capital investments. Corporations and organizations that participate in globalized portfolios need access to comprehensive risk frameworks with the ability to model potential specific risks (Lopes, …show more content…
When an investor or country was to liberate its financial system, it could potentially become subject to market discipline executed by domestic investors as well as foreign investors (Schmulker, 2004). During what is known as a closed economy, domestic investors are the only ones to monitor the economy. During an open economy, foreign and domestic investors could potentially generate a possible crisis when the fundamentals deteriorate. Overreaction can potentially trigger drastic changes in investors’ risks. If there are any “imperfections” within global financial markets, it can lead to crisis. For example, “if investors believe that the exchange rate is unsustainable they might speculate against the currency, what can lead to a self-fulfilling balance of payments crisis regardless of market fundamentals” (Schmulker, 2004). Globalization can pilot crises that are related to external factors such as absence of imperfections in worldwide capital markets (Schmulker, 2004). For instance, if a country were to become strongly dependent upon foreign capital, there would be a sudden shift in foreign capital flow that could potentially cause financing difficulties and cause a downturn in that country’s

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