Liberty Through Wealth is the name of our column because we firmly believe that successful investing can lead to wealth - and give you the freedom to live the life you want. Yet it has become particularly obvious that investing IN freedom and liberty can also boost your portfolio's performance. We can see that by considering nations that are economically unfree. They lack many of the fundamental human and economic freedoms that we in the West take for granted: property rights, rule of law, and the ability to trade and make contracts, plus the basic freedoms of speech, association, religion and assembly. To be sure, there is no simple "free or unfree" dichotomy. The Fraser Institute produces an annual report on economic freedom around the world, and the 2023 edition is now out. According to Fraser's metrics, Singapore is the economically freest nation, followed by Switzerland, New Zealand, the United States, Ireland, Denmark, Australia, the United Kingdom and Canada. The 10 least free nations are the Republic of Congo, Algeria, Argentina, Libya, Iran, Yemen, Sudan, Syria, Zimbabwe and Venezuela. So, what does all this matter to investors? It turns out that avoiding unfree countries is a good idea. They tend to have rulers who are capricious and unpredictable - and investors tend to misprice the risk that comes along with that. There's an exchange-traded fund (ETF) I wrote about almost two years ago, the Freedom 100 Emerging Markets ETF (CBOE: FRDM), that uses economic freedom indexes - like the one above from the Fraser Institute - along with other metrics to create an emerging markets investing strategy that embraces personal and economic freedom. Recently, I compared the Freedom 100's performance over the past five years with that of the broader iShares MSCI Emerging Markets ETF (NYSE: EEM). It's up 29% over that time, while the broader emerging markets index is down about 7%. |
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