Invest in Emerging Stock Markets… Now!

This isn’t a financial blog, but I thought I would post a financial suggestion. Obviously, the stock market has been at the center of news lately, as stocks have tumbled (and bounced in the US), with the Chinese stock market plummeted. It may seem odd to suggest investing in emerging countries right now, with such markets in a decline.

However, the great mantra of wisdom of the stock investing is this: “buy low and sell high”. This may seem obvious on the surface, but what it suggests is contrary to our natural emotional response. When a stock has tumbled, we naturally want to get away from it, but when it is low, it is actually often the best time to invest. And when a stock has done well, we may be excited to buy it, yet this is actually the best time to sell. As China has plummeted the emerging stock market, now may be the best time to get in on it.

However, I want to offer another reason that is a little more in line with the theme of this blog, and that is to guide our investing not only by our opportunities, but by the ethics of our investing. I believe that we should be committed to working towards fighting global poverty, helping the poorest of the world, those that are predominantly found in developing countries. Can our investments intersect with this pursuit?

Currently, there have been many that have been encouraging “trade, not aid”, for helping the poor. While pitting trade and aid against each other is false dichotomy, they are actually complementary. Business growth can’t and won’t immediately provide food, water, vaccinations, and education for the current generation of children, and facilitating that generation is actually the foundation of the next generation of business growth. But, business growth is undeniably critical and central to a long-term, sustainable economy that can eventually meet the health, education, and other needs of future generations. However, encouraging growth in business can be difficult, and finding interventions that do not contradict the goal of self-sustainable growth is hard. Some attempts like microloans have helped some, but have had unintended negative consequences as well, with family needs become neglected as loan recipients struggle to pay back even low-interest loans ( though overall, they have usually had a net positive impact though).

But one of the most economically sound and proven mechanism for investing in businesses is right in front of us: the stock market! And if you have money that can be directed towards particular mutual funds or stocks, you already have an opportunity to invest your finances in way that not only can yield dividends for yourself, but can support businesses in these developing countries, that can lead to downstream benefits to some of the poorest.

Lately there has been increasing interest in more ethical product purchasing, like buying fair trade food products, and one-for-one programs. Again, these are noble efforts, and I certainly encourage this, but some of these are built on some shaky economic ideas. Fair trade is prone to market manipulation that suppress signals and can yield stagnation, inequality, and lack of innovation. One-for-one programs, like Toms, well, have kind of become the joke of aid efforts, failing to address the most important needs and having a market undermining effect. While again, I definitely encourage everyone to pursue ethical purchasing, what if we applied these same principles to our investments? What if we not only bought ethical food, but what if also had an ethical retirement plan? What if our investments could help those in the greatest need, and do so based on what seems to some of the most solid and proven economic principles?

Now I certainly can’t claim to be the first to have the idea of ethical investment. However, most of these efforts have been more focused on avoiding companies with questionable business practices, or products (like tobacco companies). But, like with giving, we can almost certainly have a vastly larger impact by focusing on the good we can do by finding important positive investments, rather than just simply avoiding unethical investments. Proactive positive ethics have much more potential passive negative-avoidance efforts.

And to be clear, I certainly don’t want to encourage anyone to use their investments as a substitute for charitable giving. These two efforts meet completely different needs that are complementary. And business investment certainly isn’t panacea for the poorest, the marginal business boost and its downstream benefits for those in poverty are often indirect, obtuse, and slow. But, I do think assessing our investments from the perspective of concern for the world’s poorest is something to consider (and I would love feedback on how you think it may or may not help or impact). From a moral perspective, I believe this may be a great opportunity, and from a financial perspective, this might be one of the most opportune times to consider it.

Advertisements

2 responses to “Invest in Emerging Stock Markets… Now!

  1. Check out kiva.com for effective microloans. I have been doing this for 5 years or so and it helps people all over the world and repayments are around 97%. Minimum loans $25, so it is very easy to do.

    • John, yes, I have actually donated to Kiva before, and I think this is a great suggestion. But, the point of this post was a little more about how to make (potentially/likely) profitable investments, in a way that can also be potentially be beneficial to the the developing world (instead of just corporate America) as well. But for those who don’t want to actually donate their money, but also want to make an impact without the need to actually profit from their investments, Kiva is a good choice (and of course there are other micro-fianance options available as well). Thank you for the suggestion!

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s