Would you trust me with your money?
It's an interesting litmus test of a person, and not usually too difficult to answer. Providing you're familiar with the person in question of course.
This is also what most investment boils down to. If you invest in gold or oil or other commodities, you can remove the human element of your risk, and you end up exposed only to the forces of supply and demand. But property has tenants, and you need to trust they'll pay you, and not trash your place. And shares are entirely dependent on the people behind them. A company is only as good as their people.
But the story doesn't stop there. Even an investment in good people can fail if the people around them are rotten. More specifically, those in power. What good is it investing in a country where the government can acquire your property if, one day, they decide they don't like you?
Furthermore, an investor cannot always vet the people behind every investment he makes. He has to rely on averages, and more importantly, reliable systems to keep people honest. Remember, he's an investor, not a manager.
Finally, there's the relationship between risk and return. Theoretically, the market rewards taking on higher risk with higher returns, but my feeling is that expected returns don't often justify the risk. Investors sit behind desks. They aren't on the ground in the countries they invest in. And when you get a closer view of what is going on, doubts surface more readily.
These are the sorts of problems I find myself considering when I look at the world through the lense of an investor. Recently, while I was daydreaming, I ran through the countries I have some familiarily with, and asked myself the question, "would I invest?" Here are the results. This is more art than science. I haven't looked at the data - only the people and their social systems.
I've ranked them into five groups: no thanks, probably not, maybe, probably, and definitely. A brief description of each is given below.
These countries fail on grounds of corruption, incompetence, or insecure property rights.
The problem with the following countries is not necessarily incompetence. It's usually either a lackluster market or uncertainty around property rights. Or just too much damn paperwork.
This is the point where risk reaches a level I'd be willing to adopt, depending on the return. With some proper research, I think I could find some opportunities in these countries.
I'd invest in these countries after some basic vetting.
Yes, please take my money.
Please remember, this is based on my experiences with people and cultures as I travel around the world. There is no data here. It is simply food for thought. You should only invest in what you understand.Global Investment