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This seven-part article series details the ways in which you can diversify your investment portfolio on Mintos. The first article showcased how you can diversify your loan portfolio by investing in different types of loans. The second article in this series explained how you can create a well-diversified investment portfolio by including loans with different maturities in your investment portfolio.
It is easy to fall into the habit of investing in geographies that you are most familiar with. For example, your home country, or somewhere that is considered to have a stable economy. However, the economic crisis of 2007 was a good reminder that nowhere is truly safe.
Any country is open to economic risk, and as such, if you have invested everything in one place then you too are at risk. Therefore, the more countries included in your portfolio, the better off you are. Investing in loans from different geographies is the third way you can diversify your investment portfolio on Mintos.
Investing in loans from different geographies
Geographical diversification is a smart way to diversify your portfolio as economies in different parts of the world are not fully correlated with one another. Foreign markets seldom move in perfect tandem with each other and losses in one market can be countered by gains in another.
Geographical diversification reduces the overall level of volatility and exposure to external factors of your investment portfolio. For example, if the EU goes through an economic recession and it causes many borrowers to default on their loans, an investor having a part of their portfolio also in emerging economies with higher growth rates such as China, Brazil and India, could expect it to offset the losses encountered by the part of portfolio invested in the EU.
Generally, the farther apart the countries, the better level of diversification achieved, because neighbouring countries tend to be interrelated economically. Therefore, whilst investing in different countries will surely increase the diversification of your portfolio, investing across different continents can be even more important in ensuring your risk is less concentrated. On Mintos, there are 37 loan originators issuing loans in 23 countries on four different continents – Europe, Asia, Africa and South America, thus our marketplace offers unparalleled opportunities for geographic diversification.
How to diversify geographically on Mintos?
On Mintos, if you invest manually, you can select which countries you would like to invest in on the “Country” filter. This is on the left-hand side of the Primary and Secondary markets:
You can select as many or as few countries as you like, depending on the requirements of your investment portfolio. By selecting a country, all loans available for investment in this country will be shown.
If you use Auto Invest you can also select loans based on their geography with the “Country” filter. You can create one or multiple portfolios with different countries in each.
Mintos offers investors the unique opportunity to diversify across countries and continents within a single marketplace. The marketplace has unparalleled opportunities to diversify across different loan types, maturities and geographies. But that’s not all the marketplace can offer you in terms of diversification. Another great way to diversify your portfolio is through investing in different currencies. Stay tuned for our next article which will take a look at this in more detail!