Like many people, I like to help others who are less fortunate. However, I am worried about giving money to aid organizations. Firstly, I have doubts as to whether most of the money is going to the poor and if the money does go to the poor whether it goes into something useful. There is a saying that if you give a man a fish you'll feed him for a day or two, and if you teach a man to fish, you'll feed him for a lifetime. How do I teach poor people to fish? I believe that helping poor people doesn't necessarily require sacrifice from me. Take China for example. The Chinese economy is growing at around 10 per year, compared with the growth of most developed economies at 3 per cent. The Chinese are getting richer and richer. The size of the middle class in China (and even India) is so large now that companies are desperate to get in. Foreign investments in China certainly help the Chinese but are these foreign investors investing in China for charity, to help the Chinese? Certainly not. These foreign investors put money into China or India with the expectation of making more money. Investing can be a win-win game. This is why I believe that if you want to help the world's poor, instead of putting aside 4 per cent of your income to aid organizations, instead put aside 4 per cent of your income and invest that into emerging market funds. Investing any more than 4 per cent might be too risky. The Vanguard LifeStrategy High Growth Index Fund invests 3 per cent in emerging markets. Once I have $100,000 I will put all my money into this fund.
An emerging market is simply defined as a country with a per capita GDP under $10,000 that is undergoing economic change. It is emerging, opening up, and integrating into the world economy. The existence of emerging market funds I think is a powerful incentive for governments who want more money coming into their countries to open up the economy. By opening up the economy they increase opportunities for citizens' wealth to increase.