Geographical diversification is the practice of diversifying an investment portfolio across different geographic regions in order to reduce the overall risk and improve returns.
This method can be used by both private investors and companies to limit and manage risk. Firms are able to lower their risk exposure to political and economic changes and "forces majeures" by locating particular departments and/or resources in different parts of the world. If one of the company's assets is located in a region more vulnerable to change (tsunami, earthquake, revolution, riots) the parts located in other areas may compensate and provide balance.
Since the cycles that drive business and investment are experienced at different times in different countries, foreign markets seldom move in perfect tandem with each other. Losses in one market may be offset by gains in another. Geographical diversification significantly reduces the overall level of volatility and exposure to external factors. What does this mean for an investor? The more diversified your assets, the safer your money.
Diversifying an entire portfolio is one way to preserve wealth.
Geographical Diversification for Gold & Silver Investors
In case of the precious metals investors, the geographical diversification can be applied by purchasing physical gold and silver and storing it in various places around the globe and by paying attention to one's mining stocks' portfolios of properties and making sure that the latter are not all in just one area, but in multiple areas. For instance, if one holds shares of 5 gold miners and 3 of them have mining properties in only one country, then applying geographical diversification would mean making sure that the remaining 2 companies focus on mine development and production in other countries.