Geographical Diversification

  

Categories: Metrics, Econ

You need to diversify your investments to maximize returns while minimizing risk. Everyone knows that. See: Efficient Frontier. It can get hard, though, because companies can share characteristics that turn out to be obvious, but are so fundamental they can hide in plain sight.

Take geography. You invest in a promising app developer, a medical device company, an insurance giant and oil producer. Pretty good industry diversification.

But it turns out all those companies are headquartered in the same few blocks in Manhattan. Meanwhile, that part of New York has suffered an outbreak of a hallucinogenic black mold, which has caused every executive related to your portfolio to make erratic decisions, and to bark like seals during investor conference calls.

Now all the stocks in your portfolio are plummeting. A lack of geographical diversity coming home to roost.

In real-life practice, geographical diversity involves putting money in different countries and global regions. So don’t just buy stocks in U.S. companies. Look for firms centered overseas as well. Russia. China. Japan. New Zealand. Belize.

Well, maybe diversify to Belize by buying some beach-front property there.

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Finance a la shmoop what is a market order? alright people it's a type of buy

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price right now that is whatever price the market is telling me it's worth [Investor discussing market orders]

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right now that's my price so the market prices change all the time and yes of

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course the broker can choose to look at his screen this minute or that minute or [Broker looking at computer screen]

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the following minute and the market will be changing if you're placing the order

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