Basic Income Experiment: How to cover citizens' expenses on essential needs and make their life happier?
A few days ago I read the news: Germany is running a Basic Income experiment. Based on my last year’s research I found out that the most life-threatening diseases directly depend on one’s mental health and stress level.
The more stressed you are, the more risky your life is
That is why I’m an avid fan of the basic income approach because it could decrease the stress level of millions of people and save their lives. Moreover, it’s not a socialism system and keeps the best of capitalism opportunities.
The crucial goal here is to determine what amount of basic income is enough to decrease stress and stimulate people to continue working and increasing the gross national product.
Sources of basic income
I met an idea, that payments should be formed from additional corporate taxes. I suppose it’s not the best approach, however, I haven’t found another way yet. But I discovered some interesting thoughts and will share them with you below.
Let’s dive deeper into a Norweigen National Fund.
My knowledge of Norway was limited to a few facts: a cold and expensive country with a lot of salmon until I’ve watched a film by Vladimir Pozner. I was inspired.
Norway gains the most profit out of oil revenues, as so does my home country. However, both differ greatly in terms of gross national product and the quality of life. I decided to find out why and one of the reasons must be their national fund:
- Norway discovered oil in the North sea in 1969
- In 1990 they adopted a National Pension Fund and six years later made the first money transfer to the fund
- According to 2019 annual report, the fund’s market value has achieved $1,148B
Check out a fascinating interactive history map here
Norway’s pension fund has a similar goal like someone who would want to save up enough money before retirement in order for the basic living expenses to be covered by the return on the investments. And that country is a great example of a well-balanced investment portfolio for such a goal.
It seems very much to the point, doesn’t it?
The portfolio overview
The fund consisted of investments in 74 countries and 50 different currencies at the end of 2019. All their investments go outside the country, so the economy can’t get overheated.
Diversification by asset class:
- Equities up to 63%
- Fixed income asset up to 30%
- Real Estate management up to 7%
Diversification by geography:
- Almost half of the funds are invested in North America
- A third of investment in Europe:
- The rest is invested in Asia, Latin America, Africa, and other emerging areas
Fixed income asset
The fund’s fixed-income investments are comprised of 70% in government bonds and 30% in corporate bonds.
The fund diversified its fixed income portfolio into two segments:
- 90% are invested in developed countries bonds in a wide range of currency: USD, EUR, Pounds, and Yen.
- Emerging country bonds account for 10% in local currency
Сorporate bonds estimate for 30 percent of the fixed-income portfolio: debt issued by companies as well as covered bonds, or debt issued by banks that are secured by a portfolio of mortgage loans.
The currency diversification in the bonds portfolio:
US Dollar ~ 45.6%
Euro ~ 27.5%
Japanese Yen ~ 9.8%
British pound ~ 4.4%
Real Estate portfolio
Up to 7 percent of the fund can be invested in real estate. They buy office and retail properties in selected cities around the world, as well as logistic centers that are part of global distribution networks. Rental income and increased value of the properties are the two main goals of the real estate portfolio.
Have a quick look at their short video explanation.
Equity portfolio
The fund has shares of around 9,000 companies around the world, except Norway. They invest in companies from Asia, North America, Europe, and so on. Followed by developed markets in Europe and Oceania and emerging markets.
Instead of a conclusion
Yeah, I know there’re dozens of disadvantages of the approach and we won’t get any payments at least in the next 30 years from our government. It was just my personal opinion.
To sum up the idea, I want to believe that countries can find additional financials to cover the Basic Income Programme by effective management of the funds. Guess what, the “BI” program isn’t the top priority for the majority of countries, so we’ll have to provide ourselves with the basic or passive income by creating a personal investment fund.
