‘Think’ for a better future

Shekh Mohammad Rashedul Hasan, with 15-year industry experience is leading a dynamic investment management team at UCB Asset Management, a wholly owned subsidiary of the United Commercial Bank. The engineering graduate of BUET, having an MBA from the IBA of DU, is one of them in the country's investment industry who are rigorously working on the much needed awareness creation among the mass people regarding the importance of their right financial behavior for having a better financial future.

In an exclusive interview, recently, he spoke to TBS Senior Correspondent Mahfuz Ullah Babu elaborating his thoughts alongside the opportunities his industry and firm offer.

Do you think Bangladeshi people are making enough investments for a brighter financial future?

Not enough.

Historically, our people are savers, and whenever they think of investment, real estate properties and gold always come first due to this well-established concept that the value of these assets is well-protected from erosion.

Amid the scarcity of land, which more and more people want to own, real estate prices have appreciated a lot already, while the return from savings is squeezing day by day.

The mass people tend to avoid the stock market as most of them are unaware of the opportunity the market offers—long-term fortune from the best companies.

On the other hand, the short-term approach of unequipped retail investors of chasing quick bucks from trendy stocks and their failure to generate sustainable wealth discourage others to think of stocks.

Also, without a basic understanding of the economy and businesses, stock investing is not the right job that people can or should do. Talking to a wide range of clients, I see the pains of traditional savers, retired people, and limited income service holders. They are crying for options to generate a sustainable return beyond what they typically get from their savings.

However, a low-risk, higher than deposit rate, and most importantly, a consistent return over the long term can solve this problem.

Can you elaborate?

Sure.

In the 1980s and 1990s, some of our uncles used to buy primary shares of reputed companies. And I have grown up seeing some of them making a handsome fortune out of those tiny investments. I am not sure how many of us have ever thought that, at the end of the day, we are all consumers of these big companies. We are giving out healthy revenue and profits from our pockets to those companies year after year by buying their products, but how many of us ever desire to own a small part of such businesses.

My uncles, though they were very few in numbers, did. A few thousand bucks in their primary share investments once now has turned into a big fortune as they held on to the investments over decades. When I look back to understand what was their secret recipe behind this success- it was very simple- TIME. They just subscribed to IPOs and forgot that they had invested in those names- after 20/30 years, those tiny investments have become so big that one of them could develop his own house with that wealth.

There are such multinational companies that generated 20%+ average annual returns over the last two decades, on a compound basis. And we still see such opportunities exist in the market. The power of compounding, in the long run, is so impressive that nothing can beat that approach ultimately.

Let's do a simple math here- let's assume a fund manager is capable of generating a decent double-digit annual return on a 'consistent' basis. And, let's assume your initial 1,000 Taka investment roughly takes 5 years to grow to 2,000 Taka, it may not sound too lucrative- right?

But, if the same consistency prevails, in the next five years, your money will not be tripled, it will quadruple instead.

In 15 years, your money will be 8 times bigger and, in 30 years, it will be 64 times.

People in most other countries, including our regional peers, are well aware of this compounding magic. Unfortunately, most of us are yet to. 

How can I secure a consistent return over a long period?

When the economy is growing, markets are expanding and industries are flourishing, the capable companies tend to ensure their fair share in the growth story, while the best ones usually outperform their peers.

You have to analyze everything relevant to identifying the best businesses and keep yourself invested as long as nothing terrific happens to end the good story.

Also, the governance standard within the company is important which ensures that you are not unfairly deprived by any means as a minority owner of the company.

However, making correct and consistent investment decisions requires relevant knowledge and a specific set of skills, which most individuals naturally lack or cannot afford to ensure alone.

But why go for brain surgery when investment specialists are here to serve them to achieve their long-term financial goals.

Then, why is the fund under professional management so small in Bangladesh—still less than 3% of the total market capitalization?

Two things I can mention—the dominant culture of speculating in the stock market and delayed efforts by the industry for the much-needed change.

The good news is, in recent years, some top-tier banks including United Commercial Bank have started investing in asset management to build high-quality teams with the best talents.

Banks are the most trusted entities in the country's financial system and their investments in the brokerage industry a decade ago have changed the entire landscape of the brokerage business.

I foresee a similar and massive change in the asset management industry happening in this decade.

We are campaigning for the right investment behavior.

There is a huge scope to mobilize investment funds—both from institutions and individuals.

All over the world, both SMEs and corporations hand over their funds to professionals and these institutions focus on their core job.

Also, our local institutions are increasingly opting for professional investment management services to a moderate extent.

I feel our service is a crying need for individuals, especially for those who are not in the stock market and also for those who have been trying in this market without any visible result.

I have spoken to several brokerage firms CEOs and, as per their estimate, less than 10% of retail investors are net gainers in the stock market and the rest are struggling to either pick the right stock at the right time or hold the right stock, while most of them face losses buying trendy stocks at a high price that later corrects drastically.

I believe a portion of the high net worth families' wealth is also likely to be under professional asset managers' management in the coming days as the way it happened in other markets.  

How should individuals rightly plan their personal finances?

Most of us, despite having a good education and career in various fields, are not serious enough about taking the right personal financial steps.

We generally tend to spend more, save or invest less, and begin late with the proper financial plan.

In other countries, even school and college-going students are well aware of the right personal financial behavior, the need for savings, and choosing the right investment tool that fits their financial goals at different stages of their lives.

And here comes the need for increasing such awareness among the people in which we asset managers can play a much bigger role than what we are currently doing.

The concept is very simple- the younger you are, you can have the luxury to put a significant amount of your wealth in high return instruments- you can have all the FUN. The older you grow you must worry about protecting your wealth and thus shift your wealth to lower-risk investments such as fixed income or low risk mutual funds.

The ultimate goal is a well-off retired life- when you should not be worrying about your monthly expenses and medical bills.  

In our country, parents tend to invest everything for their children's wellbeing and success. Culturally, we parents have an expectation that the children would take care of us in our post-retirement life- both emotionally and financially. However, if the children fail, our retired life turns horrible.

I would say, it is possible to balance between the two. Saving some amount every month, and investing the money for a risk-adjusted decent return may give you a wealth base to support a worry-free future.

In the USA, whatever an employed person prefers to do with his or her income, their system ensures one thing—a preparation for retired life.

Under the 401 (K) plan, a portion of their income directly goes to retirement plans and the professional fund managers take care of that money to grow. In Bangladesh, except government entities, many of us do not have any pension plans.

Also in the private sector, many employers deprive their outgoing employees of fringe benefits despite running those on paper.

Regardless of your financial preference, I would call to begin with saving a small amount every month, investing those under a long-term plan.

If you are young and want to speculate in stocks as a herd, please carry on if you believe you have an edge there- I do not want to discourage you from having fun.

But, my earnest request would be to opt for some secured plans that would protect you from ruining in case of failure there.

 Who does not have savings at all, what should they do?

Understandably, for the limited-income people, it feels like saving every month is a luxury idea.

The truth is, it is possible if we rethink seriously. Make your will first.

First, cut down your non-essential expenses. And secondly, if there is no room to cut down your expenses at all, desperately acquire new skills for multiple income streams and then save a portion every month.

Initially go for low-risk products, build a wealth base and choose your plans that match your financial condition and aspiration from time to time. Very capable investment experts are already here to serve you.

If you put only Tk 5,000 every month and the tool generates a 12% compound annual return on average, 20 years later you will end up with Tk 46 lakh in total wealth.

We are campaigning with a call to stay home on at least one of the Fridays every month to save the expenses of outing—Uber bills, restaurant bills, shopping bills, movie tickets, and many others.

Whatever your financial behavior and preference are, for the sake of a secured financial future, please set aside and put at least several thousand in the right long-term investment schemes, such as open end funds managed by the best asset managers.

I always discourage borrowing until it is a must, be it from a credit card, personal loan, or margin loans during investments.

Also do the maximum to avert your health risks, ensure an insurance protection plan for your family.

How to identify the best asset managers?

I would suggest checking the reputation of the firms at first that comes from the people within, their talent, commitment, performance record, and governance standard.

The second task for an investor should be, looking through the portfolios of the funds. See if they are investing your money into the right securities in line with what they have promised.

The competitive industry will allow you to change your asset manager if they fail to deliver.

UCB Asset Manager is approaching the first anniversary of its first fund. How much response have you received so far and from which types of investors?

Well, the initial subscription of our first fund was dominated by institutions and an increasing number of individuals are buying the fund units nowadays.

In the first ten months of the fund, we have beaten all the fixed income alternatives.

I am very happy to see a young banker investing a portion of his monthly salary in our fund under the systematic investment plan (SIP). He is also putting his annual bonuses and additional savings here.

It is not costing him too much now, but he is ensuring this forced monthly savings into our SIP, which he believes is a good alternative to the traditional DPS in banks.

Unlike many other financially literate individuals outside the investment management industry, this young banker got his thought right as he wanted to better focus on his job and grab the long-term opportunity with the help of professionals.

Within and outside the financial industry, we are increasing our efforts to convey this big call to our people, "Please think for a better future." And then ACT.

What is the guarantee that in one or two decades your fund would generate enough return for me?

Well, an open-end fund is not a zero-risk product like government bonds. That is why it inherently offers a higher return than other available savings instruments.

No - there is no guaranteed return.

But track record says capable fund managers across the world and also in Bangladesh have been generating decent returns beating the market indices consistently in the long run.

We can recall the bear market of the mid-2010s and also during the first quarter of 2020, when most of the stocks' prices were going down and share prices of excellent companies including some multinationals came to a very attractive price.

Expert investment managers are well recognized for timely picking such companies with very high fundamental potentials which do not necessarily need a bull market for price appreciation.

In the bull market, many companies with average or poor fundamentals tend to be overvalued, and buying and holding those stocks eventually generate horrible results. Expert investment managers also help you avert such traps.

We do not promise very big returns, instead express our confidence navigating your investment journey through generating average return over an above average timeline.