What Poland Can Teach You About Investing

by James Hires

Poland's Economic Miracle

There's a Polish saying I love: "Jakoś to będzie." It means something along the lines of "It'll be alright."

It might sound like passive resignation, but it refers to optimism in the face of adversity. And it suits modern Poland perfectly.

When the Soviet Union fell in 1989, Poland was free for the first time in decades.

But its economy was in shambles. Its currency was less than worthless. It would have been easy to despair.

Instead the Poles put "Jakoś to będzie" into practice and chose optimism. They aggressively liberalized the country, embracing free market principles.

Poland became Europe's fastest-growing economy. It avoided the pitfalls of other post-Soviet states like Russia, which is now ruled by oligarchs who horde the country's considerable wealth.

Poland's economic boom created a robust middle class and widespread prosperity.

The country's economy is among the most resilient in the world. It has gone 27 years without a recession.

When the Great Recession hit in 2008, Europe's GDP shrank by more than 4.5%. Poland's grew by more than 2%.

The country chose to be optimistic... and it all worked out.

So how does any of this relate to you?

In short, "Jakoś to będzie" is a useful philosophy for investors for two reasons...

1. Optimism

Poland was destroyed by the Nazis in WWII. The Communists took over after the war.

After devastation like that, it would have been easy to focus on everything that had been lost.

But Poland was optimistic. It focused on the future while learning the lessons of its past.

The democratic government that replaced the communist regime implemented a free market system along with policies that made it easy for domestic entrepreneurs and foreign investors to participate in the new economy.

Poland has demonstrated a remarkable entrepreneurial spirit, and its economic prosperity has created many domestic success stories. For example, CD Projekt is a household name in the video game industry, and Ursus' farm machinery has penetrated markets across Europe.

The country welcomed foreign companies too. Major corporations, like GM and Volkswagen set up factories in Poland, providing even more opportunities for Polish workers.

In investing, it's always a good idea to stay optimistic. Learn from your losses, but don't dwell on them. Always look forward.

2. Diversification

With little in the way of natural resources, Poland had to build its economy the hard way and rely on resourcefulness. As a result, Poland has one of the most diverse and robust economies in the world.

Poland's economy is primarily service oriented, but it still has a strong manufacturing base. Both the service and manufacturing sectors are split into numerous industries.

No one industry dominates the economy. Poles work in information technology, automotive, telecommunications, furniture, steel, plastics, machinery, technology, pharmaceuticals... the list goes on.

Such diversity insulates Poland's economy from crashes and recessions in individual industries.

In investing, keeping your portfolio diversified is the best way to limit your risk. Being pragmatic while thinking outside the box is key to success in nearly everything.

It was Poland's optimism and diversity that allowed it to bounce back from Soviet rule and has kept it afloat since then. These same principles can boost your portfolio as well.

So take a note from Poland... Jakoś to będzie.

Good investing,

James

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