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The financial world can be complicated and confusing for people new to investing. Satish Rai, former Chief Investment Officer at TD Asset Management and OMERS, has written a new book called Lessons Learned: Wisdom from 40 years of Investing that he hopes will simplify the investing process and help Canadians reach their financial goals.
Transcript
Kim Parlee – Investing can be complicated and confusing, especially when you consider the amount of information available through the internet and social media, not to mention the jargon used. Well, my next guest decided to do something about that.
And here it is, right here. This is his book. He’s come out with a new book called Lessons Learned: Wisdom from 40 years of Investing. Satish Rai is the former Chief Investment Officer at TD Asset Management and OMERS, and he joins me now.
So I just have to start by saying you’re a successful guy. You’ve done a lot of stuff. You’re doing a lot of stuff. Why are you writing a book?
Satish Rai – You know, I’ve been fortunate to have made a lot of mistakes over my 40 years of investing, and I’ve heard thousands of people ask the same questions over and over again. And the last part is that financial literacy has become way too complicated. So I decided to write a financial literacy book for everyday Canadians in the most simplest possible terms. It’s a picture book, and it’s really meant to have one-minute lessons on how the stock market works, how savings work, what are the financial assets that are there.
And again, this book is meant for all Canadians, and it’s available free online. And the print version is available, and 100% of the profits go to charity. So this is really something I wanted to do out of love, by giving back to all the Canadians that have supported me over the last 40 years.
Kim Parlee – That’s amazing. It’s a really well-put-together book, I have to say, because when I think about — actually, you know what? It reminds me a bit of almost like, if social media was a book, this is kind of what it would look like, right? This kind of thing.
I’m going to show some pictures here because I don’t know if the team will be able to pick it up down here. We’ll see when I’m talking. But you list 32 lessons in the book, everything from when to start, good debt versus bad debt. What are some of the key ones you want to highlight?
Satish Rai – Well, I think you’ve already just talked about it. First of all, the most important thing is starting really early. We learn very early, as a society, how to spend money. We don’t learn early how to save money. So the first thing is start saving at a very early stage, and I’m talking about 12, 13, 14 years old.
The second lesson I’d say is that the investment industry is way too complicated. And if you can’t explain the product or what you’re buying in minutes, it’s too complicated, and there’s bound to be a lot of potholes. Another example is just focus on really great quality companies and hold them for a very long term. We have this relentless focus on short-term trading and trying to catch those short-term bubbles, but long-term investing. And the final thing is, have a very long-term time horizon. Our time horizon from social media, from the internet is seconds to minutes, to 15-second videos. Investing is really meant to be a long-term marathon.
Kim Parlee – It’s really hard, though, because you’re right. Even people talk about Warren Buffett’s wealth. I mean, it mostly came in the last five years, in terms of compounding what he had. But in this environment, it is so hard to be patient.
Satish Rai – I think you’ve actually hit on, I think, the biggest tax on investments, which is short-term focus, short-term noise. Corporations don’t make money up and down every single day. They make money over very long periods of time. Strategies are played out over a very long period of time. And if you can change your mindset to buying great businesses with great products and great geographies with great leaders, and hang on to them for a long period of time, the magic of compounding will happen.
Kim Parlee – You actually have in here, “Investors often focus on overall returns but say it’s better to focus on income.” What’s the difference, for someone who doesn’t know?
Satish Rai – Yeah, so there’s this relentless focus – did the stock go up, the stock go down. And they happen all the time. It’s like someone yelling about the price of your house every single day. What I decided to focus on is how much dividend checks, or GIC checks, or bank account interest that I’m getting, and is that growing every year? So if a corporation is doing really well, they pay us more dividends, and that growth takes place.
So I talk about eating apples instead of cutting down the tree. I talk about eating eggs instead of the chickens. So the goal should be that you should live off your dividend checks and your interest income and never have to really be forced to sell your investments.
Kim Parlee – Tell us about some of the personal lessons you’ve learned when you’ve done this and maybe some of the common mistakes you’ve even experienced. I mean, you said you’ve made some mistakes over the years.
Satish Rai – So early in my career, I was speculating like crazy on long shots. And I actually thought there was a 50-50 chance of them winning. And the fact is it was 1 in 100 or 1 in 1,000 chance of winning. I did that, in particular, in the early 1990s when it comes to gold stocks and metal stocks. I thought, oh, if they find gold, I’m going to make a lot of money. But the question about if was 1 in 1,000 chance, not a 50-50 chance.
Another example would be that I find that people really get caught up in bubbles. And so in 1990, we had a real estate bubble, so everybody went in. In 2000, we had the tech, media, and telecom bubble. In 2008, we had the housing bubble. And then most recently, after COVID, if you remember all the tier-2 and tier-3 internet names, they went nuts like crazy, and they’re all down 70%, 80%.
So there’s this focus, which I’ve also had over my career, to focus on short-term bubbles and trying to catch that wave, and I think that’s a big problem. And another example is leverage. And so leverage will eventually kill you in the financial services industry because the stock market is bound to go down a big amount. And if you leverage 50%, you’re going to get a margin call and so forth. So I don’t mind using leverage, but make sure it’s very careful and it’s the right amount.
Kim Parlee – Yeah, the safe companies, the dividends, the income, those types of things, too. To keep things even easier, I understand – I’m going to pull it up here – you included a cheat sheet at the end of the book. All right, so let’s pull up the cheat sheet. What is the cheat sheet? How to start today. Okay, I’m going to pull it up again, so people can start. You talked about a couple of these, too.
Satish Rai – Yeah. So there’s two separate things. The first thing is that we actually forget all the products that are available to Canadians to utilize for free. The government has these products, home ownership savings plans, TSFA, RRSP. So first of all, use all these resources that are there. And I’m not going to say one is better than the other, but they’re all good to use.
The second thing is I talk about keeping it very — starting very early, but also early and consistent. So even if you have $100, and you want to save $100 every three or four months, do that. Another example of it is having a base amount in your checking account to avoid fees and to give yourself a safety net during rainy days. And there will be rainy days.
Another example — another key thing is absolute focus on long term, like long term and quality. So what I’ve done is I’ve taken the book, which is a very simple picture book with very simple lessons, and at the very end, I’ve given you all the tools that you have and the four or five key takeaways that you can have a conversation around.
Kim Parlee – And now, you just have to do it.
Satish Rai – Now, you have to do it. Yes.
Kim Parlee – Sometimes, it’s easier said than actually to have the discipline to do it. And just remind us again, I’ve got about 10 seconds here, but where’s the book available?
Satish Rai – The book is available for free on my website, satishrai.com and on Amazon to purchase, and 100% of the profits go to charity.
