I do not understand why the answer is B? I thought in today’s world you can focus more on “industry/sector” diversification than “country” diversification.
I argued this for a while myself, but I’ll let them have the 3pts.
I just read it again, if you read the statement it says he should diversify across industries in the UK, but not anywhere else. Makes sense.
But he does say "most U.K. companies have an international presence, we should focus on diversifying across different industries in the U.K. and not worry about diversifying globally across different countries.” So he is right - not worry about country diversification but focus on industry. The answer provided by CFAI, Option B talks about international diversification - which in my mind is wrong.
Doesn’t matter, you’re still limiting yourself to UK companies. He will still benefit from diversification from investing in different industries and countries.
And it’s just been confirmed on my flashcard app. You can’t receive the full diversification benefits without diversifying in both countries and industries.
Okay - so the way I look at it - industries gets you some (international) diversification, but you have to spread across countries also.
Badabing
Global investing relies on international diversification and industry diversification.
Downfall to investing in only domestic companies (even if global presence): 1. Limited diversification 2. All industries may not be present 3. Assuming that the domestic company is the best in the industry worldwide.
All the industries in th UK are still affected by the same political and local economic forces. You need country diversification in addition to industry diversification.