

Ask HN: Is microfinance a smart way to park your savings? - etal

Here's the post that prompted me:<p>http://www.marginalrevolution.com/marginalrevolution/2008/12/is-micro-credit.html<p>In the context of PG's essay "Be Good" (http://www.paulgraham.com/good.html),
this makes a lot of sense. Not in terms of fleecing the world's poor, but as a
smart investment that happens to be nearly indistiguishable from charity.<p>At the moment I'm still a little averse to the stock market, but I do have some
savings and I'd like to put some portion of it to better use (no major financial commitments on
the horizon). These organizations piqued my interest:<p>Kiva -- http://www.kiva.org/<p>United Prosperity -- http://unitedprosperity.org/<p>Silicon Valley Microfinance Network -- http://svmn.net/<p>Anyone here have some experience with these groups, or other microfinance
ventures?
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kirse
_At the moment I'm still a little averse to the stock market_

You're smart to have recognized that you need to diversify, but don't fear the
stock market! How much of this applies to you depends on your age (I'm 22),
but this is when most people should be setting aside a little money for
higher-risk investments. Risk doesn't mean invest into a poorly-performing
company and start praying, but try to find a couple profitable micro-caps or
small-caps and stick $500-$1k or so into them. Personally, I look for foreign
micro-caps that run great profit margins and make physical products that
people need (primarily healthcare / transportation). Patented products are
even better.

Not only that, but right now there are plenty of large-cap companies that have
lost a lot of value not because they're bad companies or losing money, but
because everyone is simply dumping stocks out of fear.

Either way, do your research on the balance sheets + income statements, take a
good look at how they well they approach their core competencies/products and
make an informed decision. Regardless, the job losses and increasing
foreclosures have only begun to take effect, so don't be surprised when 2009
brings the market lower and opens up even more investment opportunity.

~~~
etal
Very true. My best investment so far has been Illumina a few years ago, which
I found because they were blanketing the job boards. Why hire like mad unless
you expect to blow up soon? However, I'm not really willing to be a full-time
investor at the moment. Index funds and a high-yield savings account do a good
enough job of keeping up with the market for very little intellectual
investment.

Regarding high-risk, high-yield investing, the Kelly criterion comes to mind.
It says that given some bias in the outcome of some bet, and a return
proportional to the expected result (without the bias), there's an optimal
portion of your principal to wager in each round to get the best yield over
time. And it's surprisingly low -- in the case of a coin toss rigged 51% in
favor of heads, for example, you should only bet 2% of your principal. If you
go all in each round, even though the odds are in your favor, you will
probably lose everything.

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jhancock
you missed a new cool one: <http://qifang.cn> China education loans. They just
were recognized as a World Economic Forum 2009 Technology Pioneer.

Its not my company, but I keep a close eye on them and they have good things
happening.

[http://www.businessweek.com/globalbiz/content/dec2008/gb2008...](http://www.businessweek.com/globalbiz/content/dec2008/gb2008123_970055.htm?chan=globalbiz_special+report+--+tech+pioneers+of+2009_special+report+-+tech+pioneers+of+2009)

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vijayr
I've given 10 loans so far at Kiva, and 3 have been totally repaid (others are
in various stages of repayment). I don't think you should look at microfinance
as investment options. That said, there are a few micro finance organizations
that give out a small percent of interest. Microplace is one example. But as
noodle says, an online savings account would fetch you more.

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theantidote
Maybe invest $100-200 in microloans but Kiva at least doesn't pay you any
interest on the loans. I don't know about the other two organizations. These
are different from charities in that they aren't tax deductible so if that's
important for you then look elsewhere.

I heard some advice on the radio the other day: invest your age in bonds. So a
40 year old would put 40% of their invesments into bonds. Bonds are slow but
reliable sources of income and are basically the same as a loan to a large
corporation. Try that if you're looking to back loans and earn interest.

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noodle
well, it depends on what you're trying to do.

microfinance charity-type organizations have little risk, but no matter what,
you're not really making any money on your investments. you'd make more from
an online savings account.

if you want to do some good, those are good options. if you want to grow your
savings, they're not that good.

~~~
etal
I'm looking to strike a balance, mostly. If I can match the 3.3% my savings
account pays and do some good in the world, I'm happy. Currently I fire off
the occasional small check to environmental groups; I consider that a good
enough investment. But to commit a significant chunk of my savings, I'd want
to see some return.

