Today’s global uncertainties include economic instability, geopolitical conflicts, and sudden spikes and dips in various currencies. These factors can converge to force many international high net worth investors to seek refuge in more reliable investments as a means of securing the future.
Asset diversification is no longer sufficient to avoid the sudden spikes and dips that can be inherent in today’s volatile economies--instead, geographical diversification represents an important strategic key.
This article is the second in a series that focuses on some of the unique and varied ways High Net Worth Investors (HNWIs) can preserve their wealth. Read on to learn more about some of the benefits of geographical diversification and how it can help you in planning the future.
Protection Against Currency Instability
In countries that have eschewed the gold (or silver) standard, devaluation of currency in response to commodity shortages, civil war, or coup can be a very real threat. And having millions (or even billions) of dollars in assets within a single country may mean very little if these assets are held in a currency that is vulnerable to deflation.
Geographical diversification can protect your assets from fluctuation if a country’s political or economic systems begin to fail. Meanwhile, holding your assets with a company that has its finger on the pulse of world issues can give you some well-deserved peace of mind in knowing your investments are largely shielded from destabilizing factors.
Access to Exclusive Products in Strong, Stable Markets
If you live and own property in an economy that's struggling, it becomes even more important to gain access to financial products that are rooted in a stable investing environment.
Countries like the U.S. and Canada are relatively geographically isolated. This means they aren't as vulnerable to the types of "turf wars" that can often impact landlocked countries, damaging infrastructure and reducing economic growth in the process.
Shelter from Geopolitical Storms
Many of the world’s largest economies are still vulnerable to deflationary depressions, so having all your eggs in one basket (even a large, sturdy basket) can be risky. The United Kingdom's narrow Brexit win in 2016 has the European Union on edge that other member countries may seek similar "divorces."
UK-based domestic businesses have seen an average increase in the price of their stocks of only around 2 percent since the vote while a 33-percent average increase has been seen for multinational UK-based companies. Geographical diversification can provide a figurative “port in a storm” for investors seeking shelter from geopolitical controversies. If investors flee from European holdings and turn towards selective geographical diversification, a natural hedge is provided.
In today’s climate of global uncertainty, focusing on a geographical diversification of assets is one of the wise choices for High Net Worth Investors. This level of diversification provides a hedge against any economical disaster that may arise, protecting your wealth’s future.