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Proactive investors will find much food for thought in this interview, where one top wealth executive reveals their top “money lessons learned” to findaWEALTHMANAGER.com.
Ramzy Rasamny co-founded the Plurimi Group in 2008 after a distinguished banking career which included him heading up the Middle East region for Credit Suisse in the UK. Having spent 20 years working for big finance brands before becoming chief executive of a boutique wealth manager, he has five key money lessons to convey to users of findaWEALTHMANAGER.com.
For Rasamny, one of the most shocking things to emerge from the financial crisis of 2008 was just how unprepared people were for losses generally, with many having waded into the markets despite not fully grasping the basics of investing. In his view, for some the relationship between risk and reward has only really been rammed home by the turmoil seen across asset classes in the years since:
Even up until two or three years ago people didn’t actually assimilate that risk-free means cash and if you want to make any returns above cash then you have to take on some risk. You would still hear people say, ‘I want to make 5% returns; I don’t want to stay in cash, but I don’t want to take any risk either’.
As professional investors, we have to explain that it simply doesn’t work like that. There is no such thing as risk-free reward and that you have to – with care – take on risk to get returns.
In Rasamny’s view, one of the best things parents can do for their children is to start them on the path to investing at a young age and let them learn for themselves the ups – and downs – it brings. Good habits like conducting thorough research before investing should be instilled as early as possible, he believes:
If I had my time over, it would have been good for me to have started investing at 13 or 14 years old – and that’s actually what I’ve encouraged my own son to do.
I wish I had been given little bit of money to start investing – and to have maybe lost some and earned it again – so that I would have learned back then how to use money, how to make money and how to research the whole investing process. Things you learn like that you never, ever forget.
Einstein famously dubbed compound interest “the eighth wonder of the world”, declaring: “He who understands it, earns it; he who doesn’t, pays it.” So, while long-term investing is all about harnessing compounding to exponentially grow wealth, there is of course a dark side for debtors on the receiving end of its power. This was a lesson Rasamny learned the hard way – via credit cards – when he was a young man fresh from university:
Kids need to be taught from a young age how with credit cards you pay through your teeth. I came out of college with a finance degree and yet still found myself borrowing a few thousand pounds – which I then spent five years paying off at a rate of something like 20%!
I was young and silly, despite having just got my finance degree. It was a very expensive, but very valuable lesson for me to learn.
With most people today glued to their smartphones, it can be difficult for investors to escape the barrage of panic-laden headlines that accompany each economic event or wobble in the markets. Not only is this information overload incredibly stressful, Rasamny observes, it can also make for poor investment decisions driven by emotions rather than facts. Investors need to learn to ignore the news and hold their nerve to avoid classic errors like selling at the bottom of the market, he says:
Back in January we had even quite sophisticated clients coming to us in panic and we had to advise very strongly: ‘You should not sell now; this is the wrong move. Just keep your calm, stop looking at the markets and leave it to us.’
We were experienced enough to know that what was happening in January wasn’t anything dangerous, but rather simply the market overreacting to everything. Whether it was China or oil, any kind of news was blown completely out of proportion.
We say to clients: ‘We’re the professionals and we will tell you if there is anything you need to do. Otherwise, don’t do anything.’ Happily, our clients trust us to just get on with it.
The proliferation of spread-betting platforms online has led the unwary to believe that foreign exchange is an easy way to make money at the touch of a button, but many will have been stung by erratic currency movements and could have had their losses magnified many times by geared trading. For Rasamny, speculative traders are setting themselves up for disaster and even the more sedate forms of FX investment are to be viewed with extreme caution:
The one thing I’ve learned over my career in finance is never to invest in foreign exchange. A lot of investors like to speculate, particularly on Asian currencies, and that from my experience is absolutely a losing game. You will never make a penny from it long term.
I’ve seen so many investors who are making so much money over one or two years, only to then lose every bit of profit they’ve made. People should remember that there is no logic to how currencies move whatsoever.
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Based in London (and with an office in Gibraltar), Plurimi Wealth is an advisory wealth manager and so serves clients that tend to know the financial markets and investments well.
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