MARIA: Our guest today is Pavel Lunin, a certified financial adviser to the Ministry of Finance of the Russian Federation, a practicing investor with thirteen years of experience. This interview will be of interest to those who want to learn how to earn money and those who want to learn how to spend it correctly. Pavel, how to correctly and competently come to that idea and understand what investment is and where to start?
PAVEL: I wanted to thank you for inviting me to this interview. I will share the benefits, answer questions and help understand this seemingly complex topic, as most people think, but in fact it is very simple and easy. Investments every year become an integral part of any person. It does not matter who he is by profession and status. Investment is for everyone! The later people realize that they need to invest, the worse it is for them, unfortunately. Investing should start as early as possible. And I would like to divide this into two concepts: there are financial investments, that is, when we invest money to make a profit, and there are investments when we invest time to acquire some skills. And, in fact, we are all investors. That is, we are all investors from birth: we go to study first in the garden, then to school. We invest time in our skills - we learn. In the future, training in these skills leads just to the fact that people come to financial investments.
MARIA: Many people will support me now, especially those who started investing in 2005-2006 – a lot of people got burned. Now, when you talk about the fact that someone is investing, namely in the stock market, on the stock exchange, I immediately hear indignation at this, that this is all a hoax, etc. Has this market somehow changed today? How many fakes and deceit are there now?
PAVEL: Yes, indeed the market is changing and changing very rapidly. It's great that it's changing, because without change there won't be any progress. There are new programs, new technologies, and now we are living in a really cool time, when there is such a colossal growth. Personally, I enjoy this time. As for those people who started and burned themselves, then my wife and I are such. We opened our first brokerage account in 2008 and we had absolutely no strategy. We just came to the stock market in 2008 and naturally there were not so many training courses and information at that time. There was just the stock market, which we understood ourselves. It was very difficult because there were limited resources. And in the end we got burned. We lost a lot of money by investing in just one share of RusHydro. We lost almost all of our capital simply because we did not have the knowledge of the correct formation of an investment portfolio. We did not understand how it works, what are the risks and how to do it all correctly. As for losses, there are still a very large number of pyramid schemes and incomprehensible companies. There are no magic pills! The fact that you are promised on the Internet to give a yield of 100% per annum, just bring money - this is a very high-quality work of psychologists and scammers. Naturally, people thus get into bad situations simply out of banal ignorance of how it works. And in order to learn the general system so as not to fall for scammers, I think that three or four hours or just one book on financial literacy is enough to understand how it works.
MARIA: People are divided into groups: the first group are those who want to earn, the second are those who want to save and the third are those who want to increase. For me, as for a person who does not understand anything about investments, there are classic concepts of how to deal with your savings: go to the bank and deposit interest, buy foreign currency and the modern version is an investment. Of these three options, which is the most reliable?
PAVEL: Here you need to understand what is reliability for everyone! Because if we are talking about bank deposits, then this is also a kind of investor's path that everyone goes through. First you earn money, then deposits, then you start to figure out what else you can do with real estate, and then it’s already studying the stock market. These are the steps that most people actually go through. If we are talking about reliability, then there is our country, there is a bank and there are regulatory bodies that can take away a license from banks at any time. This is where the question of reliability comes in. If we place deposits in bank accounts, then our funds are insured for one million four hundred, and whoever has ten million lies, what should we do then? If we analyze this situation in principle, then the same structure of the deposit insurance agency is a state-owned enterprise. If something happens to him, it will happen to the bank and it will happen to the insurance company. Here it already turns out that, well, it’s like a dead-end situation in terms of reliability. On the other hand, we see that the dynamics are now very positive. Our country began to develop economically, and over the past twenty years we have made a tremendous breakthrough. Those who travel a lot, and especially in Europe, know that it is very problematic to pay with PayPass for food there, they mostly accept only cash. Although its economic system is very developed, it has existed for a long time, but these banal things in Russia are ahead of the rest, oddly enough. As for the currency, here we can see the history. We all remember very well how much the dollar cost, and every time the exchange rate rises, it is a panic for the Russians. People, either out of greed or out of desperation, begin to buy currency at the very peak of its growth. This is the number one mistake when decisions are made not on the basis of financial data, but on emotional grounds. These emotions are greed and fear. These are just two criteria and two qualities that harm the novice investor.
MARIA: But still, which currency is better and more reliable? Is it worth investing in it?
PAVEL: As for the currency, it is generally a wonderful means of combating national inflation. For most CIS countries, this is one of the ways to save money. If we go back to historical data, the currency has always been rising. It grew not in a straight line up the trend, but in waves. I always tell everyone my story about bananas. When I was in school, I bought bananas for six rubles - that was one dollar. Now, if we, having come to the store, look at the price of bananas - this is from 70 to 100 rubles, that is, in fact, this is the same dollar, but only the horizon has passed in twenty-five years. And if we look at the ruble, it has depreciated by about 600%, this is taking into account all inflation over the entire period. During the 1990s, there was generally colossal inflation. Who remembers this time, it was very unstable. For the majority, this period became just a kind of block to investments, to distrust of the state and the surrounding economic system. But in fact, it was another point of transition from one financial state to another. What we actually have now over the past 25-30 years is very global and cool changes. If we turn again to the history of the same stock markets, when it all began and was born, then we started it just recently, that is, we still found it, and in developed countries such as London, this is 1773 stock exchange. That is more than two hundred years! Next was the New York Stock Exchange. Naturally, the economy is more developed, all the processes that relate to taxes, everything that concerns the economic system, have already been debugged. And returning to the issue of reliability, yes, there are systems, there are brokers, American brokers with a long history, where it is much safer to keep the currency than just keeping it in your pocket or on Russian accounts. Because there they are legally protected for any investor from two hundred and fifty thousand dollars. I'll be honest, I just keep part of the airbag in a brokerage account, because I know that my money is protected there more and better, unfortunately, than here.
MARIA: There are people with an average income who have the desire and the opportunity to earn something on a regular basis. We are not talking about long-term investments. Where to start and how much money do you need to invest in order to receive an average monthly salary of 40-50 thousand rubles in terms of additional income?
PAVEL: I thought and constantly think, and this is the main question that clients and people in general who are interested in the financial literacy of investments come with. But in my opinion, this is wrong, because we need to proceed not from the calculation, but from the goals that we want to achieve. Paying attention to the influx of new investors who are now coming, they enter the stock market from a completely different angle, instead of learning how to manage their capital, increase it, do everything gradually and step by step, a person immediately buys assets, shares according to the system: "I feel like it should fire now."
Friends, this is again an investor's mistake, and this is not the right direction. If you want to make money, you first need to understand how it works. You need to learn first, and then achieve results. This is a rule that applies to all aspects of our lives. There is a misconception that in order to start investing, you need a lot of money. Friends, believe me, you can start even with a thousand rubles. This instrument is called bonds. How to buy? You need to figure this out!
MARIA: My first question is: what should I pay attention to when learning and learning this sacred work, if I want to earn money on it every month? And the second question: with what capital do I need to enter the market so that I understand that I can make a profit of fifty thousand rubles a month?
PAVEL: The first stage is to understand your financial situation: to manage your financial flows. Understand what income and expenses you have in order to understand this delta that we can invest. If we don't have this delta, then we can't invest anything. Most likely, there are either extra expenses or loans. If you have loans, then investments are prohibited. This will just lead you to a bad outcome: you will chase profitability and most likely lose. Therefore, you first need to deal with loans, and when you have a positive delta and you start earning more, then you can already talk about investments. To the question of how to come to a passive income of fifty thousand rubles a month: when you even invest three thousand rubles for a long time, for example, for twenty years or twenty-five - this is a terrible word and it scares everyone, especially those who are not ready take responsibility for your future. And by investing this money simply on the stock market, in twenty years we will come to a capital of about eight million, taking into account compound interest, from which you can receive passive income of about forty thousand rubles.
MARIA: This is after twenty years?
PAVEL: Yes, twenty years later. You need to earn more and invest more. You need to look for different sources of income so that there are at least 3-5 of them. It is impossible to get a result by investing ten thousand rubles a year. There are real instruments and real profitability. You can't jump above your head.
MARIA: If I have, let's say, two million rubles in my hands and I don't want to keep them on a savings book and don't want to run around to buy foreign currency. I want to invest in them. Can I do something with this amount in the stock market? Will I be able to receive figuratively fifty thousand rubles a month?
PAVEL: Yes, you can get this profit from a capital of two million, but here we come to the conclusion that the higher our profit, the higher our risks. For a novice investor, it is imperative to determine his risk profile - how ready he is to withstand a drawdown of the same stock market. Yes, there is such a return. We are not just talking about the stock market, you can invest in real estate, you can create your own businesses, you can invest in joint ventures, and there the profitability will be higher, but the risk there will also be higher.
MARIA: There is also such a thing as a broker - a kind of assistant for an investor who manages your investments. How safe is it all?
PAVEL: This is a very safe topic. There is a misconception that brokers are compared with "black" realtors. Due to ignorance and unwillingness to understand this topic, the life of a broker is denigrated. The broker is our assistant. A broker is an organization that helps us and does a lot of work for us - registering transactions, buying assets, and so on. Now a broker is an intermediary between the exchange itself and investors. No need to look for a broker on the Internet, because there are a huge number of sites where you can fall for a scammer. Go to the Central Bank and there are broker licenses. If the broker does not have a license, then do not even go there. The broker earns on commissions. It is beneficial for him that you make as many transactions as possible - this is his profit. It does not store your money, it does not store assets. The assets are in the depository and everything is recorded, so the broker is our friend.
MARIA: Is it possible to have several brokers at the same time?
PAVEL: You can. Even necessary. When we talk about smart investments and security. I choose for convenience and for the tools that the broker provides and for my strategy. Now I have seven different brokerage accounts with different strategies for different assets.
MARIA: What does an aggressive strategy imply?
PAVEL: An aggressive strategy is the risk profile of any investor. When you come to a financial advisor, consultant, or even start investing with someone, if you don’t get your risk profile, then run away from there and take your money, because the risk profile is a very important thing for you. According to the risk profile, there are five types: conservative, moderately conservative, moderate, aggressively moderate and aggressive. An aggressive strategy is the highest level of risk, but also the highest return. The more aggressive the strategy, the greater the risks.
MARIA: Please tell us how dangerous financial crises are or are they beneficial for those who invest?
PAVEL: Friends, the crisis is very dangerous for those who do not understand how it works. A crisis is a very cool thing, because we always double our capital in a crisis. We know how to do it and we are always preparing for it. A crisis is a great time for opportunities, when you can use different areas. Someone, yes, believes that the crisis is bad and begins to feel sad. A crisis is a great time. The system is cleared, hack companies fall off, quality is improved, because the client in any area begins to count his money.
MARIA: What stage is the stock market in now? Your colleague Vasily Oleinik predicted the collapse of the stock market in his video. He said that the starting point would be the lifting of the lockdown and the opening of borders. Do you agree with this?
PAVEL: As for the crash, we can't predict it, we can only make two predictions, and as a result, one of them will be correct. Yes, this may be, and for some reason this is also being done. When this happens it is not predictable.
MARIA: It turns out that I invested money, and when I wake up in the morning I can not see them? How does it work and what should you pay attention to?
PAVEL: If we are talking about long-term investments, then we can generally ignore this. If there is a long-term strategy, then there simply must be a delta, an airbag and there must be a monthly investment.
MARIA: 2020 has been a turning point for everyone. Online has firmly entered our lives: work, training, mastering new professions and ways of income. According to statistics, 2020 brought newcomers in huge numbers to the topic of investment. Is it so? Has the number of participants on the exchange increased?
PAVEL: I think we need to look at the statistics here. I do not think that a private investor, relative to a corporate one, has such a share of capital in the entire stock market, even taking into account the fact that new investors have come to somehow manage and influence it. Yes, people are pouring in their money, investing, and it has become many times more. It's great that people are interested in the topic of investments, because without investments, I don't know how people will continue to manage their financial lives. Returning to the past, I had a broadcast with a psychologist and we discussed the topic of investment: why don't people invest? And we came to the conclusion that, if you look at our parents, there was the Soviet Union and everything was clear and precise. There was work, sanatoriums, vacations, and the man knew that at sixty he would retire and he would have this pension and he would live wonderfully. The system was built in such a way as to manage people normally, so that they know and be calm that they have a future. Now this experience is not our experience. This is the experience of our parents, and it was passed on to us from them in our brains, in our relationships, in our learning. All this led to the fact that I very often hear that I will live one day, here and now, and I don’t need a future at all. Friends, this is all a disclaimer. You just don't want to take responsibility for your future. You better answer me, where will you get money at sixty-five years old, if you now merge everything? 95% of people don't think about it at all. They believe that there will be a bright future and that this issue will somehow be resolved. I myself even understand that, living my every year, without investment, this issue cannot be solved in any way. You will not have more strength and you will not be younger. And now you can make a choice: you will survive in retirement or live here and now, but think about the future.
MARIA: Where to run and who to believe, because now there are a huge number of all kinds of sites and learning platforms. Where to begin? Who can you trust in this and what should you pay attention to when you decide to take investment training so as not to worsen your financial component? Textbooks, courses, what to choose from all this?
PAVEL: Let's start from scratch. If you have only heard the word investment and the stock market for the first time, then start simply with the literature of great people. Probably the most understandable and simple book in my opinion is the book by Bodo Schaefer "The Path to Financial Freedom". It is easy to read and the audiobook is easy to listen to. This book gives you all the basics. You need to plunge into this world and understand how it all works. The second book that I recommend to all parents, we read it with children from time to time - this is also Bodo Schaefer "A Dog Named Mani". A very easy and cool book that introduces financial literacy. The third book is more about setting up your system: how much to invest, how to save - this is "The Richest Man in Babylon." Start with these books, just start reading them. Further, as already mentioned, there are many educational programs, the Internet is really littered. The Higher School of Economics website has free videos on both investment and financial literacy. There you can see free material to dive into this topic. My last training was the “Reasonable Investor” training at the Skolkovo School. Here I give preference to professors who do not just deal with theory and teach in theory, but professors of practice who have 20-30 years of studying the stock market and various investment theories. Just don't pass the exam. I had to put together my own investment portfolio and manage it for ten years to show certain levels of return. A professional, one who has practice, has a result. Not the one who entered the stock market yesterday and made a hundred or two hundred percent return on a rising market. When a person has gone through crises, he can share his experience with you and, indeed, you communicate with him and understand that a person does not just invest, he understands and burns with his business. These are the people and teachers that need to be chosen. If you buy a course, look not only at those who teach it, but also what experience they have, whether there is practice in this course and what result this course gives.
MARIA: Is it possible to read foreign literature on investing, since we understand that the mentality is different and what is good for a European and an American, a Russian person will not suit at all?
PAVEL: Good question. In fact, those books that I recommended, they can be read and perceived. It provides a common base that is understandable to a Russian person. The structure itself, the system and the principle, it is the same, that is, it can be safely applied. The stock market has its own nuances, but the essence is the same.
MARIA: We know that you are a personal finance and investment mentor for millionaires, and you also have your own investment courses. Please tell us about it!
PAVEL: Let's start with mentoring and what it is. A mentor is like a coach in the gym. A professional who dives into his subject. Each person, working in his field, he studies it for a large number of hours. If we are talking about the same sport, then in order to achieve a result, you need to train, you need to know how to run, how to take care of your body, how to breathe. The same is true in finance. I am not alone, my wife and I are studying on an ongoing basis. In addition to what we teach, we ourselves are constantly improving our skills, passing various trainings, financial trainings. Mentoring itself lies in the fact that for any person, in any field, the older he gets, the narrower his vision of the financial part. That is, if he earns money, and we are talking now about those people who earn a lot of money, then their focus is more on business, family and themselves. When we start working together, I reveal the area of finance that allows a millionaire to increase his fortune and remove those mistakes that are not visible to him. They do not affect the overall process, but if they are removed, then a very decent delta is obtained there. Having just talked about any financial topic within fifteen minutes, you can give a person a recommendation that will bring him at least tens of thousands, and at most millions of rubles. Just because he has the wrong focus.
MARIA: That is, you work for people who already have capital, like some kind of auditor? Or is it without access? Are you an analyst, do you analyze the financial components of the client?
PAVEL: Of course, this is an analysis of financial assets, and how they work, what profitability they bring. Sometimes we begin to analyze the assets of clients, and I understand that out of his capital of 100-200 million, his profitability is 1-2%, and on the market you can make at least 10%. Just due to one decision, a person immediately restructures his activities.
MARIA: You have an author's investment course. Tell us about it!
PAVEL: Yes, we have courses. The course was just born out of our common mission. We realized that our time resources are limited, and there is a lot of knowledge, very good experience, good practice and excellent results. In order to share this with people, we have created just our author's program. Now I'm looking at the market, and it will soon be unparalleled. We combined there not only financial knowledge, not only knowledge of the basics, but also goal-setting, economics, planning, and tools. These are not just investment courses - it's even more about changing your mindset in a positive way. In the first module, we immediately remove such concepts as a "rainy day" and so on. We do everything in stages and this is probably the feature of our course. We designed and created it ourselves. And it is a great pleasure to receive positive feedback and words of gratitude from my students.
MARIA: Do you keep in touch with your students at the end of the course?
PAVEL: Yes, we have a general chat. Everyone writes there some news. My wife and I do not have time to process as much information as there are investment ideas in the world. Students are posting news in the chat that we haven't tracked yet. It actually turns into such a living organism when people with one idea turn into a community of investors who are together. I thought that young people who want to invest would come to the course, but women aged 45-60 come who want to figure it out. They understand and study much more thoroughly than young people, but they do it with great desire and show results.
MARIA: After completing the training, do you issue any diplomas or certificates?
PAVEL: Definitely! We issue a certificate of completion of the course and it is awarded to everyone who has reached the end. Came to the course, so you need to reach the end. You can't get a diploma just because you paid for the education. You have to reach the end. We contribute to this in every possible way with the motivational part, and we personally check the videos and homework. People reach the end and collect their investment portfolios in the long term. Naturally, they receive diplomas.
MARIA: There is such a thing as a qualified investor. What it is?
PAVEL: If we are talking about newcomers, then they do not need this status. Again, now the government is promoting investment not just so that people form their own pension portfolios. All this leads to the fact that there will probably be no pension. A qualified investor is a concept for those who do not buy those assets that are contraindicated for them - aggressive ones. All these programs, like individual investment accounts, a qualified investor, are an integral part of the development of the investment industry in our country. A qualified investor is needed in order to buy those assets that an investor in a conscious state can buy. To obtain this status, you need to undergo certified training and have 6 million rubles in your account.
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