Transparency is a vital topic to all investors – though they may not necessarily realise it. Any beginners guide to investing needs to discuss this subject – an appreciation for transparency is not just for professional money managers.
The real issue when understanding markets and money, is that the same levels of information ought to be available to all. In part, this does relate to liquity, but also to honesty.
There are reasons why insider trading is illegal and prosecuted by regulators whenever possible! Should it be possible to simply trade on insider information to make money at will, the ‘level playing field’ upon which most investors trust relies, is removed. When that happens, markets simply become a way for the well informed to take money from the less well informed. Is that theft? If it isn’t it is very close to it…
However, in some countries and some markets, corruption is very widespread and has an impact on all levels of business. However, this is not the case in Malta. Whilst in Cape Town, South Africa, your author stumbled upon a weekly magazine that writes stories solely about corruption! Noseweek is an investigative magazine and its existence suggests that there are many elements of business in South Africa that leave ethics behind. Would you want to invest passively under such circumstances? Nor me.
In many ways, it could be argued that ‘perfect information’ is never available, especially to the small investor. Many private investors seem able to buy without any understanding of the information they see, so should it matter if not all the facts are available?
Many fund managers do have an advantage in terms of the quality of information that they can glean from management. But, as they are able to meet that managers themselves, this ought to be apparent. However, this advantage should – if the management are not too loose-lipped – be relatively minor.
Since law firms and investment banks ought to use a ‘chinese wall’ to separate information flow, they ought not to have an edge when a merger or acquisition comes around. Lets hope that this is the case…
We answer YES! it does matter. And if you take the lessons of this website to heart, it will matter to you.
As the importance of accurate and timely information becomes more obvious, your investment decisions will be guided in part by trust. Trust in the management of a company.
Thus, when thinking about possible types of assets to study and hold, take some time to understand whether you feel the market is clean and fair enough for you to have an even chance of making successful investments.