How to diversify your investments across Geo-Political zones.

We have discussed how Geo-political Factors affect ones investments. Now we will discuss how to diversify your investments across Geo-political zones.


The first step in diversifying your investment is finding out and classifying them into these Geo-political zones. You can choose to diversify your investments locally in your country (As banks do) or internationally as international companies do.

To classify investment based on geopolitical zones

Decide and assign a risk factor to each Geo-Political zone: As risk is directly proportional to  geo political zones are not equal. Some are riskier than others. Hence assign a risk factor to each (You can use the higher the factor the riskier the investment). You must also note that risk is directly proportional to rewards so these should not discourage you from making an investment is such zones.

Analyse the exposure and ensure they are not connected or related to each other else you will be double counting:  Connect  Geo-political zones heavily related to themselves as the same risk for instance. Two countries threatening to go to war with each other will face the same risk as related to war.

Divide your investment into slices according to their Geo-Political Zone: Divide your investment into slices and apportion the smaller amount to the riskier ones. So lets say you have $50,000 you will divide it like this. 60% will go into safe investments with risk factor of 1-3 and 40% will go into riskier investments of 5 and above. Now divide the 40%  ($20,000). into the various zones according to the various risks the possess.


Assign a particular percentage of your portfolio to each zone:  Now classify the percentage of your portfolio to each  sub-zone, specifying the amount to invest in each

Review and manage your portfolio and ensure you are adequately covered by periodically re-accessing the risk:  At the time of investing a particular Geo-Political zone may not be risky but as time goes on the risk factor will just shoot up. Take the Brit Exit for instance. A company having its investments there was not facing the risk posed by Brit-Exit such as Higher Taxes, Labour etc. However as soon as the decision was made in 2016, all investments in that region as related to foreign European companies took a hit. Because of this, one must always review their investment periodically to ascertain whether to liquidate them ( sell them off) or add to them.



An Example will be given in the next post