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Why might it be easier for an investor desiring to diversify his portfolio internationally to buy...

Why might it be easier for an investor desiring to diversify his portfolio internationally to buy depository receipts rather than the actual shares of the company?

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Expert Solution

It is easier for the investor desiring to diversify his portfolio investment to buy the depository receipts rather than actual shares of the company because depository receipts are less volatile and they are also exposed to the lower risk and it will also provide the investor with the secured rate of return and higher stability because these are not that tradable in the market where as the stocks are continuously traded and there is a risk related to the the erosion of the value of the investment of the shareholder and there is no guarantee of the payment in form of dividend from the company to the shareholder.

Shares of the company are continuously reflecting the mood of various market participants and it is also reflecting the performance of the company and which is getting discounted regularly so stock investment is not passive in nature and it is continuously changing so it will have a risk related to volatility and uncertainty whereas depository receipt are safer investment and they will be not be fluctuating and they will also provide the investor with the security of receiving the payments in form of principal at the maturity.

jeff jeffy answered 2 years ago
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