Definition of The Island Principle

The Island Principle is a global investing strategy that asks investors to move mentally to an imaginary island and abandon their very normal bias toward Wall Street. Shifting to this island perspective dramatically changes the investor's view of the investment prospects around the world.

The Island Principle extends Modern Portfolio Theory by asking investors to view the world as many separate markets choices, not just two investment pools--the United States and everything else.

This simple change in viewpoint increases investment opportunities exponentially and gives investors a new way to employ the unique power of diversification in an attempt to reduce portfolio risk. With better risk management, Island investors can seek investment opportunities offering potentially higher returns.

Island Principle investors seek to:

Diversify portfolios across markets

Diversify portfolios across different managers

Reduce overall portfolio risk through this diversification

Increase returns on investment

Getting Started in Global Investing by Robert Kreitler explains the benefits of using The Island Principle and how ordinary investors can implement The Island Principle effectively. To learn more about the book, click here.