AbstractThe purpose of this article is to analyze the effects of international portfolio diversification on an investment portfolio. Alternative investment vehicles will also be examined. Finally, derivative securities and how they can further enhance a portfolio's performance will be discussed. Investment Enhancement DocumentThere are several factors to consider when trying to evaluate how to invest your money. A good starting point, however, is to consider not just which funds to choose, but rather what the portfolio should be made up of. There are three different separate elements that will be evaluated here. First of all, the effects of international diversification on an investment portfolio will be analyzed. Alternative investment vehicles will then be examined and discussed. Finally, we will explain how the use of derivative securities can further improve the performance of a portfolio. Many people have looked at choices outside of investing in the United States. International wallets are no longer rare. International portfolios can create even greater diversification for the client. This is because if the US stock market collapses, most of your portfolio will be virtually lost. Even if there were a decline, overall, the impacts could be enormous. However, if you took, say, 40% of your funds and allocated it to international stock markets, all of your investments would not be dependent on the performance of a specific stock market or economy. Therefore, a much broader form of diversification is created. After considering whether an international portfolio is something you would like to invest in, the next step is to invest in alternative investment vehicles. There are different types of investments. Stocks, bonds, money markets, mutual funds, CDs, and so on. There are also other types of investments that can be made, such as property, collectibles and so on. Derivative securities are yet another alternative investment vehicle that can aid or enhance a portfolio's performance. A derivative security is a “security whose returns depend on the current price of an underlying asset and allow investors to offset their positions in the cash market.” www.commerceinvest.com/Education/terms/TermPages/D.htmThe derivative securities market has grown a lot in recent years. Worldwide, these securities provide “insurance” on approximately $16 trillion in financial securities. A good comparison is that the derivatives market is similar to the insurance industry in that "their economic function is to transfer risk from those unwilling to bear it to those willing to bear it for compensation"..