Geographical Diversification

Geographical diversification is an investment strategy that involves spreading investments across different regions or countries to reduce risk and enhance returns. By diversifying geographically, investors can mitigate the impact of local economic downturns, currency fluctuations, and geopolitical events, gaining exposure to various markets and growth opportunities. This approach is commonly used in portfolio management to balance risk and capitalize on regional growth trends.

Example

A global mutual fund diversifies its portfolio by investing in North American, European, and Asian markets, reducing exposure to any single economy and benefiting from global growth trends.