Investing internationally may pose greater political and regulatory risk. This statement is TRUE. When investing in international markets, there are various factors that can contribute to higher political and regulatory risks compared to investing domestically. Here's why:
1. **Political Risk**: International investments can be influenced by political instability, changes in government policies, geopolitical tensions, and even potential conflicts. These factors can impact the stability of the market and the performance of investments.
2. **Regulatory Risk**: Different countries have varying regulatory frameworks governing investments. Changes in regulations, trade policies, taxation laws, and compliance requirements can affect the returns on international investments. Investors need to stay informed about these regulations to mitigate risks.
3. **Examples**: For instance, a sudden change in leadership in a country could lead to policy shifts that impact investments. Additionally, regulatory changes in industries such as energy, technology, or finance can significantly affect the performance of international investments.
Therefore, due to the unpredictable nature of political and regulatory environments in different countries, investing internationally indeed carries a higher level of political and regulatory risk compared to investing in domestic markets.
