Tell Me Why
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Tell Me Why
Tell Me Why the biggest risk for investors may be waiting for the perfect time
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In this episode, Fedor Panteleev, Chief Product Officer with Denara Group serving CUSP Wealth, clears misconceptions preventing people from growing their wealth while shedding light on Sharia-compliant investing offered by digital wealth platforms.
And this habit is only one thing that you can control because you can't control the market.
SPEAKER_00But is there ever really a a perfect time to start investing? So we try to kind of all these tests are retired and not the okay. Well, hello and welcome to another Golf News podcast. It's great to have you along. I'm Lachlan Kitchen. And on today's episode, we're going to be talking about investing, or maybe why people don't invest. We know that many people in the UAE think about investing, but they actually never start. And it's fascinating because we hear almost every single reason why people don't start. Some of them are quite incorrect, like I don't have enough money, or I'll start when the markets come down. Maybe I need to learn more first. For Muslim investors, maybe it is even harder because finding investments that align with your faith might sound complicated, restrictive, or difficult to trust. But are those barriers real? Or are they myths that perhaps we've repeated and told ourselves? And we've heard them so often they now sound like facts. Well, today we're going to be unpacking some of the biggest misconceptions stopping people from building wealth, from fear or procrastination to confusion around halal investing. Joining me today is Fedor Panteleve. Fedor has spent years building digital financial products and studying how people actually make decisions about money. Fedor, welcome to Tell Me Why. Hey, it's great to have you on the podcast. Thanks for having me. Let's first of all start with the big picture. Many people understand that investing is important for your your financial wealth and also maybe your retirement. But many people never begin. When you look at investor behavior, and you've looked at a lot of people in the UAE, what is that most common reason people give for not investing? And what do you think is the real reason behind they don't invest?
SPEAKER_01If you hear people, always uh the reasons are pretty practical. I don't have enough money. I don't have enough experience. I'm afraid of uh looking stupid of making my decisions that can go wrong. But if you dig deeper, you will understand that most of this is related to trust. Whether I can trust the platform that I'm investing with, whether I can call uh somebody or to have like decent advice, whether the platform is regulated, uh, whether I have some sort of lock-in that I can like freely deposit and withdraw money. So all of these qu all of these uh things are much more important than just plain uh I don't have money.
SPEAKER_00Because you you listen to great investors like Warren Buffett, and he says the pain of losing money is greater than the joy of earning it. And and that's probably something that people are they want to lead towards. It's safer. It's safer just to not invest the money. But that line, I'll pick up on that. I don't have enough money to invest. Is that one of the biggest myths? And where do you think that comes from? But secondly, what amount does someone need to realistically start investing? Um, I believe it's not a myth, but it's a pretty old thing.
SPEAKER_01Um, I would say outdated, because like 15 years ago, like 20 years ago, we had a time when, okay, to invest, uh invest, uh you needed some guidance suit, you needed uh $100,000 in your assets uh to be able to participate in the market. But during the past like 10 years, everything has changed. Right now, uh a lot of digital platforms are presented on the market, also in the UAE. Uh it's similar to when we were like booking travel with the agent, right now you can uh do it like straight away. So right now, uh I don't have money, is not the issue, I believe, because uh if you spend 100 dirhams, it becomes uh just receipt. If you invest 100 dirhams, at some point of time it will become like part of your wealth. So now this is an important distinction.
SPEAKER_00Because I think about my grandfather, and he used to tell me the importance of saving, which is not wrong, but obviously, if we're only saving, our money is going to be eaten up by inflation. And I think that's something I do want to clarify with you. Saving and investing, uh what is the difference between the two, and why do you think that probably matters more than ever in today's economy? So saving is just uh putting your money aside.
SPEAKER_01They will not lose in value, right? In terms of like nominal, uh you put 100,000 durhams, it will stay 100 duhrams with some like small, small percentage up on that. With risks, uh with uh investment, now you can uh go down and ups, but it's inherent, right? This risk is inherent and it's natural for investments. But this is the basis for your wealth. If you're talking about saving and saving flank from a personal finance perspective, uh you need to save and you need to use current or saving accounts, but for your uh cushion, basically, but for your um emergency fund, I would say. But if you want to grow your wealth, if you want to uh get to retirement, and this is especially important in the UAE when uh we don't have like uh retirement system here, if you want to get to the retirement uh with decent amount of wealth money, you need to invest.
SPEAKER_00So so it's it's fair to say you need to start saving, and then you need to have what would some cultures call that nested, a base. Yes, and on top of that, uh then you can start investing. So if we look at someone, let's take a real world example. Maybe someone's got some money they've been saving and putting aside. It's currently in a savings account, as he said, earning a couple of percent. Let's put some real numbers. If just say I've got a hundred thousand diams, it's been sitting in cash for maybe ten years. What does inflation do to that purchasing power compared to investing it?
SPEAKER_01So uh right now, um the official inflation in the UA is about two percent, I believe. So if it will take like ten years and money sitting in the current account, um, like in this case, we are not thinking that it will uh drive any returns. So you will have in 10 years about 82 uh thousand of Dihram. So you will lose 18% of value. You you will be able to buy 18,000 dihams less of goods for that money. And that's not all. Basically, okay, that's official inflation, but your uh there is an economic term called perceived inflation or your own inflation. When we take into account that okay, uh rent in if you live in Dubai, rent in Dubai increased. For example, this year you decided to change rent to another place, okay, increase. Plus, UI uh Dirham is back to US dollars, and US uh USD inflation is a little bit higher than that of Dirham's. So effectively we are importing part of this inflation to the region, right? So perceived inflation could be much higher than that, but still even savings account will uh drive you uh maybe two and a half, like of three percent. Uh there are promotional saving accounts that that can drive like five percent or six percent, but uh main word they are promotional, right? For new money, you need to put salaries there, you know, minimum investment each month.
SPEAKER_00Yes, yes, yes, yes. That's actually a fascinating point. That generally from where we are in ten years' time, we we tend to have more expensive tastes or more hobbies. And now that thing kind of eats into the inflation as well. But um one of the common excuses we all often hear from people is uh things are volatile at the moment. Um, you know, there's a lot going on that's uh affecting the market, I'll invest when the time is right. I guess that markets there's always a certain element of uncertainty. It doesn't matter when you start, but is there ever really a a perfect time to start investing? Two things.
SPEAKER_01There is no perfect time, and there is always perfect time. So you will not get to the point when every factor of the market goes into one, it's its uh valuations are great, uh, and nobody knows about it because if this information will be public, so like hedge funds or other like big institutions will be already in the market, so it will just be priced in. So valuations are great, it's a great time to invest. You I believe you always will think, and for somebody who is not investing, uh will always think that okay, it's not the right time. So uh basically, yes, there is no perfect time, but it's better to start uh right away and continue to invest constantly because there will be ups and down ups and downs, um, and then that's fine.
SPEAKER_00It really comes down to, I guess, doing your research or working with someone who has got that trusted research to understand um the background of certain products. When people ha are sitting on their savings and they're delaying their investment, maybe they're delaying by five or ten years because they're waiting for what they perceive to be is a a secure, a much more secure situation. Where is the biggest risk there? Trying to dodge the market volatility or perhaps not investing at all?
SPEAKER_01Again, I also uh already said that risk is inherent to the market, to investments, right? And that's how like by bearing some risk, you get a more uh return that you have like by just uh using saving account. And uh saying that volatility is normal, there are ups and downs. There was a research um that said that if you invested only during the deeps of the market versus when you uh invested constant amount each month when you get your salary the same amount, for example, 15% of your total salary. So the first approach will drive maybe 1% more in returns. So it's not about like uh getting the time right, right? It's about the time in the market. Secondly, people usually perceive risk as something and returning to volatility and turning to this point. When people see uh or hear about risk in the market, they see these graphs going down, uh, red charts, but risk here is to just selling because when it's perceived and it's uh like cost of being market in the market, this uh drawdowns. But if you sell, this loss becomes permanent. As I said about timing, uh in the market, being in the market, then the risk is not investing at all, right? We were um uh discussed this before. Uh uh inflation will uh just eat your money. So not investing, it's much more uh expensive risk for you.
SPEAKER_00I've been in the UAE for five or six years, you've been here in the last couple of years, and even I've noticed over that time. The landscape has changed significantly uh when it comes to investing. In your experience, how have things changed over recent years? And why do you think more people are beginning to engage in in investing now?
SPEAKER_01Five years ago, um in this region we had two main investment vehicles, I would say. It's real estate and gold. And I have nothing uh against real estate and gold, the great uh instruments uh in the right hands, but it's limiting a little bit. If you're talking about real estate, uh it's illiquid, right? If you need money, you can't sell your bedroom, yeah, uh, like part of your apartment. Uh, if you are talking about gold, it's there is no underlying business, so it's uh more speculative, I would say. Um, but it's drug metal, so it's it's it's fine as well. For the last five years, uh these digital platforms started to pop up. Right now you can build uh your uh diversified internationally exposed portfolio uh via your phone without needing to go to again financial advisor, uh like walking to the some office, or without needing to have again $100,000, for example. And right now you can do it without paying excessive uh fees for brokerage.
SPEAKER_00Yeah, it's a bit like the analogy you gave about booking a holiday. You don't go into a travel agent. Now you can have access to hotels and reviews and opportunities to kind of do your own research, which is such a great analogy. For many Muslim investors, there is another layer to the conversation, and it's not just whether to invest, it's whether they can invest in a way that aligns with their values and also beliefs. And I guess with that, there are also other misconceptions about there as well. So we'll start with the basics. What does Sharia compliant investing actually mean in in plain language?
SPEAKER_01In plain terms, uh Sharia compliant investing means investing with the principles of uh like Islam Islamic principles. What does it mean? You need to invest in the real business, uh which is backed by real operations and not just uh by lending the money and earning the interest. So it's Riba. Another part of that it's a harar. So you should not invest in the investments or instruments that involves excessive speculations, uh gambling. But if you will take a look, uh that whole approach is pretty reasonable. So a lot of investors they are not investing in uh interest-bearing companies or they are not investing in gambling because it involves more risk.
SPEAKER_00Yeah, and I think that they there are quite similar beliefs to to a lot of people that I have with their investing uh portfolio. But when people do hear terms like Sharia screening, uh but they don't necessarily know what happens behind the scenes, how does a stock or investment become halal? Here we go to practical things.
SPEAKER_01So, first of all, uh if you take a look at the list of all stocks uh on the US market, you can filter out those companies that uh make weapons, uh engaged in gambling, uh, engaged in uh alcohol, also, banks, definitely, those businesses that um rely uh upon interest, but that's just one part. Another part is actually analysis of the financial statements of uh those companies, not those that we excluded already by the rest of the companies. So financial statements of the company.
SPEAKER_00Even the company that has not been excluded from previous step can be excluded afterwards based on No, that I was gonna pick you up on that because I wanted to know what it was like if you find a company that does align with your beliefs, but then the company changes strategy. How does that sort of ongoing compliance work with investors and also the market?
SPEAKER_01Uh share screening should not be permanent, right? Each quarter, when the new financial statement has been uh issued, has been reported, uh there needs to this whole process should be done once again. So returning to the previous question, even if the company is excluded from like a prohibited activities, still if uh 30% of assets or liabilities is connected to interest, it is not uh Sharia compliant. If more than 5%, I believe, of uh revenue is generating from again interest uh based activities, again it's not uh Sharia compliant asset. So definitely in the course of operation of the business, it could change, right? And next quarter, yes, you're right, it can be different. And the platforms that uh engaged in sharia screening need to definitely update, advise the market.
SPEAKER_00Yes, advisors about this. So looking at some of those other regulations, um another term people hear is fatwa. In the investing context, what is fatwa? Sort of who issues it, where's the compliance come from? And why do you think many investors should perhaps pay attention to where that guidance and that information comes from?
SPEAKER_01So fatwa is a ruling from recognized uh Islamic scholars, and I would say like recognized, is not something that you can as a platform or something as like investment advisor or whatever, just put uh a label on. It's usually an independent body uh that helps you to define whether the products that you are providing to the market are Sharia compliant or not. And this returning to the first question that uh you asked me, it's a part of the trust in the market. Gasp Wealth was the first company in the UE, uh, first wealth uh platform to receive official fatva from independent uh Sharia authority.
SPEAKER_00Well, congratulations. Thank you. That's very impressive. Uh one of the terms that we often hear about investing is obviously uh the words halal. That's appearing more and more when it comes to financial marketing of businesses. But if I'm looking to invest, how can I distinguish between genuine Sharia governance and perhaps what is just going to be a simple marketing label? And maybe if I am looking to invest my money, what are some of the questions I should be asking to get the right answer?
SPEAKER_01If I'm not wrong, Khalal is not a regulated word. So there is a lot of lendings that can use this word, but there will be nothing behind it. If the company has Fatwa, has really some sort of authority behind it and examining their decisions whether Sharia compliant or not, you may need to ask like three questions. Who is this Sharia board? Who is this like advisors that's helping the company? Can I see their names? Second one, how screening is performed. Because again, uh in Islam there could be like different scholars and maybe different approaches, what can be considered Sharia compliant or not. So you need to understand the exact platform and how it how it does uh the screening. And the third one is this ongoing compliance that we discussed, whether they update or it's permanent. Because really, if it's permanent, you uh can have more risk going forward when things change in the company if the business decides they want to change strategy.
SPEAKER_00Um Another one of those misconceptions when it comes to halal investing is that all halal investing means accepting lower returns. Just to address that point directly, is there really any evidence to show this? And do investors really have to choose between their faith and perhaps financial performance?
SPEAKER_01I believe that we are in the time right now when you don't need to compromise your faith. You don't need to make this trade-off between returns and your faith and your beliefs. If we'll take a look, what is actually uh Sharia investing and what we uh discussed before, it's just removing some companies that are more riskier and removing those companies that are highly dependent on debt. And this is actually uh the path some of the conscious investors are taking anyway, right? Don't rely on the companies with excessive interest, uh, debt to equity ratio, don't rely on highly speculative instruments, right, that bear like more risk. So the approach right now is similar, and you have a lot of instruments right now um uh that are Sharia compliant. We can compare the returns, uh but for my compliance, past returns don't guarantee future results. Definitely. There were some research uh that highlights that Sharia compliant portfolio is similar to the conventional one, maybe it's just a little bit more conservative. So it can drive the similar results.
SPEAKER_00And when it comes down to, I guess, looking globally, the global Islamic finance industry is now measured not in billions with a B, but trillions with a T. Looking at that growth, how has it changed perhaps the quality, maybe even the diversity, or the sophistication of many halal investments and and those opportunities that are available today?
SPEAKER_01Total uh Sharia compliant uh investment market right now accounts for I believe five trillion dollars. And it will grow to around ten by at the end of this decade. And it's driven by some markets not only like Middle East and North of Africa but also from Indonesia. And which is exact uh actually uh one of the leaders in Islamic finance. And with increase of uh this like institutional participation and retail participation, you got much more diversity of different assets that you can invest in. Yes, filter stocks, it's sukuk, it's sharia ETFs, it's different um investment vehicles and different instruments that you can participate in. One of the interesting uh concepts that we are right now evaluating is uh providing ETFs with the screened out companies that are not Sharia compliant. Because still you have several ETFs on the market, maybe 15 ETFs on the American market that are Sharia compliant, but there is like much more variety. So there is a lot of opportunities, there's a lot of diversity in terms of how you can invest and stay compliant.
SPEAKER_00You've touched on technology, has changed every sector, as well as investing. But particularly how do you think AI and artificial intelligence has changed investing for a lot of people? Does it add value for someone who is looking to invest, or do people still need to deal with someone face to face and have that human judgment and that human experience to add value?
SPEAKER_01I believe that AI will help us to deliver good service at scale. Before AI, rebalancing, filtering of assets, some sort of analytics, uh it could be done even without AI again. But right now, um advisory can be done again, can be done at scale. Previously, uh the companies could serve only a handful of clients, and those with higher balances, again, uh more than $100,000, for example, just because your advisor can't serve so many clients. Right now it's changing. On the other side, yes, AI can provide you uh advice which is will be like on demand and will be extremely fast, and AI can analyze your portfolio or your behavior, and it's really important as well. But when we're talking about financial advisor and why it's still important, especially here where uh when where real connections are really really important, is that when you have some sort of change in your life, new job, kids, you're changing countries, whatever, whatever, it's important to speak with somebody who is uh will be on your side. That's why I think it still will be important, even with uh improvements in the act.
SPEAKER_00Because I and that's a great question because I guess you also need to understand your personality type to towards risk, that perhaps a face-to-face person can work on your yeah, your life situation. Suddenly you're getting married and you're having kids, suddenly you don't want to be as risky as you would when you're first coming out of university. That's what you're looking at is understanding you as a person and your appetite towards risk. We've touched on technology changing the industry, and I think many people are aware of the financial advisor. You know, as we spoke about sitting down speaking face to face, they're probably less familiar uh with digital wealth platforms. How do you see that relationship changing between technology, automation, and the human expertise? How do you see that evolving over the next few years, over the next decade?
SPEAKER_01The whole discussion between uh what will win, Rob Advisors, or like digital advisory, digital platforms, and human advisors, I think the whole discussion will disappear. Uh the future model is hybrid. We can do much better work in terms of uh analyzing clients' behavior, providing better advice at scale, removing these mechanical mechanical parts of the work so advisors can really pay attention to what matters, and this is a situation that uh people are in.
SPEAKER_00It's about understanding the consumer, like basic business practice. It's about understanding the position in life that the investor is in, their appetite for risk, you know, and what may change in their life and their investment strategy going forward. Yeah, that's right.
SPEAKER_01And AI helps us just to remove uh this the most again mechanical part of works and actually free up the people so they can really pay attention more to connections and to providing better service.
SPEAKER_00Finally, if we can look ahead to the future for someone who is watching or listening and and they've got that money saved that they think, oh, one day I'll I'll invest. Maybe they've spent years saying, Oh, I'll start next year or when this certain conflict is over or I'll do a bit more research. What is just one thing that you would want them to understand before they finish this episode? I would leave you with one thing.
SPEAKER_01The main risk is just letting your money sit aside without being investor. Because again, you will lose money due to inflation, you will lose the growth of the market or downs of the market. Okay, there is a risk again. But I would like the audience to calculate not what I can get or what I can lose right now in the market, what will be left from my money 10 years from now if I'm not be investing. No perfect time to start, but it's really important to start and be in the market. So it's important to form a habit that will help you to invest and grow your wealth. And this habit is only one thing that you can control because you can't control the market.
SPEAKER_00I think that's a great point to leave things on. Thank you very much for joining us here on the latest episode of Golf News. Tell me why. Thank you for having me. Thank you once again for joining us here on Golf News. Today's conversation has highlighted some things that many people don't realize. The biggest obstacle to investing often isn't money, markets, or even access to information. It's hesitation. And whether you're exploring investing for the very first time or maybe trying to understand how to align your financial decisions with your personal values, the most important step is separating fact from fiction. The investment world has certainly become more accessible, more transparent, and more sophisticated than ever before. But none of that matters unless you get started. Thank you once again, as we said, for joining us here on Tell Me Why. For more insightful conversations and podcasts, visit our website golfnews.com forward slash podcasts. I'm Lochlan Kitchen, and we'll see you next time.