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Finance For Dummies

Finance For Dummies offers personal finance information on investing, retirement investing, finance, insurance, credit cards, loans and more. Personal finance education is our goal.

Tuesday, September 05, 2006

Domestic Versus Global: 1970-2000

Take two portfolios: one is a Domestic investment portfolio and the other is a Global portfolio. When you examine the Domestic portfolio you see that it contains 60% U.S. stocks and 40% U.S. bonds while having an average return of 11.5% and risk of 10.9%. Now take the Global portfolio--42% U.S. bonds, 41% U.S. stocks and 17% International stocks. This mix results in the same average return of 11.5%, but a lower risk level of 10.2%. So this is another example to show how diversification pays int he long run. You get same/similar returns while lowering your risk.

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