Investment in the capital market is often associated with some common perceptions, some of which have some ground, while the others are outright myths. Newcomers, hence, find it difficult to make the right decision being surrounded by ocean of information. SM Rashedul Hasan, a seasoned professional in investment management with more than 10 years of experience, has shared his views about these challenges with Mohammad Saiful Islam.
Mr Hasan is currently working as the CEO of UCB Asset Management. He has more than 10 years of experience in managing mutual funds in Bangladesh. Before joining UCB, he worked for LR Global Bangladesh, Asian Tiger Capital Partners, Reckitt Benckiser (BD) and Unilever Bangladesh. A graduate from Bangladesh University of Engineering and Technology (BUET), he also obtained an MBA degree from the Institute of Business Administration (IBA), Dhaka University.
Question (Q): There is a common myth about the stock market that it is nothing but gambling, and you either become rich or lose everything. How did such myths find their base?
Answer (A): The answer partially lies in the question itself as it says common 'myth.' There are examples that people have gained material amounts of wealth by investing in right businesses and there are numerous others who have lost almost everything. Most importantly, becoming rich or losing everything -- this is not binary.
If we think about the overall market performance since 2010, it is pretty depressing. Yes, there was a bubble in 2010 and every market goes through boom and bust-- which is absolutely okay. But, as an investor, one does not expect the equity market to remain bearish for such a prolonged period, which is in our case, 10 years. I think the negative perception about the stock market investing comes from there.
Q: Many think that investing in the stock market needs a huge amount of money. Also, it is a common perception that one needs to be a professional -- i.e., a banker or a market insider-- to gain from the market. Presumably, these perceptions narrow youth participation in the market. How do you think these perceptions could be altered and youths could be driven towards the market?
A: Firstly, there is no reason to believe that investing in stocks requires huge capital. While internet is widely available now, one can easily visit the DSE (Dhaka Stock Exchange) website and get every information for fact checking. One can start with as small capital as Tk 1,000.
Secondly, I do not want to alter our youths' perception that you need to be a professional to make money from the market. Unsurprisingly, making money is easy -- if you are lucky, you can make some money from the market-- but protecting that wealth and growing that wealth over a long time horizon is completely a different ball game. And for that to happen, you will definitely need professional help. It is good for our youths if they think that without proper knowledge and expertise, they should not risk their savings.
Q: How do you separate investing and trading?
A: Patient vs impatient capital.
Q: Putting the myths aside, what are the specialties of Bangladesh's stock market which should attract people to invest?
A: If you have not invested in our market before, and you think you have the required expertise to assess risk-reward potential of your investment, the good news is you do not need to track so many names in our market. My experience is that, if you can 'identify' a few good businesses and can 'own' those businesses over a long term (here long term means real long term - say 10 years), you can still outperform the market by a large margin. You just need to invest in 'time' to see wonders.
And if you do not have the time or expertise, you should simply select a professional fund manager-- in our country a mutual fund manager-- to take exposure in the market. You can also seek professional advice if you have investment professionals in your close circle.
Q: "Mutual funds are the safest option to invest in"- do you agree with this statement? What's your say on safe investment for the newcomers?
A: I have read this statement a few times. I am not sure from where one has got such notion that mutual funds are the 'safest.' Everyone needs to clearly understand that mutual fund managers are not magicians and they take exposure mostly in listed equities. So, the performance of such investments is directly tied up with the price performance of those names. What mutual fund managers try to do is to generate superior risk adjusted return for their investors over a long investment horizon. Yes, mutual funds are generally considered relatively low risk investment vehicles but these are not certainly the safest.
Those who are risk averse and new in investing should consider investing in national savings certificates and treasury bonds offered by the Bangladesh government. However, if you are young and have a long earning potential ahead (30 to 40 years), you can have the cushion to take equity market exposure, which can be done by allocating some of your savings into equities or mutual funds.
Q: What does it take to become a self-learned analyst? Do you need a circle of friends or colleagues to learn from? Or, do you need to work in the industry to become one?
A: I think the single most important factor here is how seriously you want to become an analyst-- your hard work, patience and discipline will come naturally then. I won't say that a circle of investment enthusiasts is mandatory but it definitely is a privilege if you have one.
And to self-teach, learning material will not be a problem. Trust me, no one can teach you how to think critically if you do not pick up such skill yourself. If you are an aspiring graduate who wants to become an investment professional, sitting for CFA exams will help you a lot. I do not see any reason for not pursuing to join the investment industry if you truly want to become an analyst.
Q: Is it possible to make money even in a bear market? Should people invest during the post Covid recovery stage, which has begun already, what's your advice for them?
A: One of the key components of successful investing is how well you can manage risks. One must not forget that the probability of getting an asset at an attractive price is higher in bear market. And yes, it is very much possible to make money in a bear market.
I am not a big fan of market timing. To me, time in the market is more important than timing the market. Of course, investors should carefully assess the impact of the ongoing pandemic and invest only if they are comfortable.
Q: What advice would you give to your younger self if you start investing right now?
A: Read every day-- without failure.
The interviewer Mohammad Saiful Islam is doing master's at Department of Mass Communication and Journalism in Dhaka University. He can be reached at msislam8686@gmail.com