Investing in Open Source?

echrist1 asks: "I'm in my school's investment club, and I'm in charge of investing $10,000 (real money) into technology equities. Clearly I want to make a profit, but I also want to do something to help the Open Source movement. Does anyone know of mutual funds that invest specifically in companies that further Open Source?"

Comments

First mistake is...

[imaniack]

limiting yourself just to tech stock.

hmmm....no!

[ILuvRamen]

I'd stay far away from open source in the realm of investing. Open source naturally just has a disadvantage that...you know...it's FREE! Depending on how long you can keep it invested, I would put the majority of it in holographic storage technology like from InPhase http://www.inphase-technologies.com/investors/inde x.html. I personally have followed the development for years since I first heard of the technology and it's going to be commercially available within a very short time and with even just the experimental read/write speeds they've actually accomplished, it's gonna blow quantum, flash, and advanced magnetic storage away. Put at least some in google too if you wanna risk it but that's what people have been saying for years and it's never turned out bad :P And whatever's left over, put it in anything related to anti- global warming/mass starvation/weatger natural disasters technologies cuz you know those are gonna be huge in the next couple years.

Invest in something proven

[knuxed]

Invest in something proven,opensource does not have a trackrecord that i know off.Put it in other equities based on financial research and ratios.

IBM/RedHat

[quanticle]

Both of these companies invest heavily in open source, and are pushing Linux. I'd have recommended Novell as well, but I don't know what effect the Novell-Microsoft deal will have in the long term.

Re:IBM/RedHat

[bcrowell]

If the point of the club is to learn about investing, then they need to learn that one of the basics is to diversify your portfolio. You can't do that by buying only two stocks.

In general, it also makes sense to weight your investments according to the market capitalization of the companies. According to the Capital Asset Pricing Model, this is what all rational investors do. Although the CAPM is only a model, and like any model it's only an approximation to reality, it captures something essential, which is that you want the minimum variability for a given expected return, and that means investing more heavily in big companies, because their profitability is less variable. So you look at the market capitalization of IBM (138 billion $) and Red Hat (3 billion $), and you conclude that if those are the only two stocks you're going to own, the default would be to put 98% of your money in IBM, and 2% in Red Hat. Oops, that investment in two stocks became an investment in one stock.

I'm all in favor of socially responsible investing, but you do it by taking a broad set of stocks, and then weeding out maybe half of them. You don't do it by setting some social criterion so tight that it narrows you down to one or two stocks.

Also, if the assumption is that you want to invest in some small-cap or microcap tech stocks in order to have a portfolio that will perform better over the very long term, again, it's worth looking at the CAPM as a baseline. The CAPM says that if you want better long-term expected returns, and you're willing to accept higher variability, your optimal way of doing that isn't to buy a bunch of high-risk stocks; your optimal way of doing it is to leverage your investment, and then invest in something like an index fund. Many people do in fact leverage their investment in the stock market by buying stocks when they haven't yet paid off their mortgage; they're essentially borrowing money, with their house as collateral, in order to invest it in the stock market.

Re:MySQL

[PHPfanboy]

All businesses operate for-profit, that doesn't make them an inherently good investment.
MySQL is venture funded, so you can't put any money in until they go public (which could be quite a way off)