Country Risk
Categories: International, Stocks, Bonds, Trading
Ever drive through rural South Dakota and get a craving for a Starbucks? That's one form of country risk.
Another form has to do with investing. Specifically, investing in government bonds. It's the risk that a particular country will default on its debts.
Buy bonds from the U.S. and U.K., and your country risk is very small. Something terrible would have to happen (zombie plague, alien invasion from outer space, etc.) for those countries to default.
But look to score some high yields in a place like, say, Venezuela, or any number of countries in central Africa. Then your country risk is pretty high. But again, you're (hopefully) getting compensated for this risk with higher returns.
A lot of things go into figuring out a nation's country risk. Its economic prospects, the strength and structure of its government, and its political situation. If rebels have surrounded the capital and the nation's lifelong dictator has just taken a private jet to Dubai...that's not a good sign.
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Finance: What is a Country Basket (Index...30 Views
Finance, a la shmoop. What is a country basket index fund?
All right we're picking daisies, marigolds, lilies so uh how do we [Pictures of flowers]
rephrase in Italian? Like, we want to fill a portfolio basket with just stocks [Pouring a glass of red wine]
representing the overall financial health of Italy. Is Italy healthy? While
they smoke a lot they drink a lot of wine they eat a bunch of pasta but there
always seems to be a woman from some small village who's celebrating her [Old woman at a birthday party]
117th birthday over there. Well a country basket is just an index fund of
stocks representing a country. Like we're doing Korea... South we're gonna have
in that basket dunno some Samsung, a load of Daewoo, a hunk of Hyundai and some [Company stocks being added to the basket]
nice barbecue on the side. That'd be our Korean country basket and it's a good
basket to fill if you're just bullish on a country but not really sure which
flower on which to place your bets. It's like instead of trying to decide between [The stocks in the basket turn into flowers]
roulette or poker or slots... Well you just buy stock in Las Vegas
Sands you know you bet on the entire casino, and bueno Fortuna you know good [Someone checking their cards in a casino]
luck there pal, doesn't the house always win? Yeah so why do people keep going there?...