The theory of portfolio diversification has been around for many years. The concept of diversification plays a critical role in the international context. Investors have various options or more precisely asset class to choose on while investing in foreign markets. Inclusion of various asset classes does not ensure efficient portfolio diversification unless there exists negative correlations among the chosen asset class. In the present study, equity/market indices, real estate, and commodities have been chosen as various options for international portfolio diversification. It has been observed not all assets bring maximize returns for portfolio. Among all the commodities chosen gold has been found to contribute to optimal portfolio construction.

KEYWORDS: Portfolio, Diversification, Commodities, Gold.