Money Talks with Patrick Wacht

00:00:04: Hey Luxembourg, let's talk about something that really matters.

00:00:07: Your money and your future!

00:00:10: Welcome to Money Talks the podcast that brings you honest chats with familiar faces from Luxemburg.

00:00:18: You'll hear stories of big decisions in life or personal finances.

00:00:22: No jargon no fluff just conversations which make sense And get you thinking on how to reach them.

00:00:29: This podcast is brought by Alfie.

00:00:34: Hello everyone and welcome to Money Talks.

00:00:36: Today I thought it would be interesting which basically means he spends his days around people moving huge amounts of money, discussing markets reacting to crisis trying not panic when things go crazy.

00:01:04: Patrick welcome!

00:01:06: Thank you very much, first of all for the opportunity to have this interview.

00:01:10: You belong to a younger generation of finance professionals and must've entered industry at that time when investing became more accessible.

00:01:18: everybody but also complex in terms information overload.

00:01:23: online advice available can tell us about yourself?

00:01:30: Sure.

00:01:30: Well, I work as you said in the financial industry in Luxembourg with Byron Invest and this firm for more than ten years now have been working on the area of portfolio management moving money investing into a variety of instruments overseeing portfolios or investments

00:01:48: And do these four on behalf big institutions or pension funds right?

00:01:52: Correct we invest many other people.

00:01:55: I think of today's pension schemes, insurance companies.

00:01:59: A lot different institutional investors yes

00:02:01: And if i got it right you enter the industry directly in roles with a lot of responsibility.

00:02:06: It must be easy to move billions of assets every day and You are on the action side of things.

00:02:13: what was it like?

00:02:14: discovering the reality behind the trading rooms and working with so much money.

00:02:19: To be honest, it's very interesting.

00:02:21: when I started there a lot of things were moving...a lot of action in an extremely dynamic environment.

00:02:27: to be honest at the same time its a bit challenging.

00:02:29: you need get your head around pretty quickly understand how do work is done what markets react?

00:02:38: more clients won't actually your job and be good at the job.

00:02:45: Can you translate in simple terms for us what they look like, or as a portfolio manager?

00:02:52: There is no such thing as routine to be honest because it depends on a lot of factors.

00:02:58: You depend upon what do the markets want, what do clients want... What does long-term target mean?

00:03:06: Do with money from your client's and what are the mandates that you have?

00:03:10: And your job every day is to work towards that goal, take investment decisions or divestment decision.

00:03:15: It really depends on what currently the environment of today.

00:03:18: How often do you speak with clients?

00:03:20: Once a Day more-or less.

00:03:21: To be honest it's very important in constant exchange with them to understand precisely What their need and want.

00:03:29: On other side they also want to understand The things I do.

00:03:32: gives them transparency In clear view.

00:03:36: strategy tactics we use

00:03:38: Basically, your job is about decisions.

00:03:41: Many times a day you take decisions.

00:03:43: Correct!

00:03:44: That's the essence of it.

00:03:46: yes

00:03:46: And what?

00:03:47: something that ordinary people might completely misunderstand about investing?

00:03:51: A lot of people think... ...that this very short term thinking but its actually the contrary.

00:03:58: When you invest You start by assessing yourself and asking yourself questions like What are your goals or long-term strategy or your long-term targets that you want to achieve and from there, deduct into action.

00:04:12: That might take quite a lot of time.

00:04:14: so You can't invest without a plan.

00:04:16: no not at all.

00:04:18: No I think that's I hear it many people or private persons sometimes do then just read something in the news And they start investing.

00:04:26: but is like better idea than you have really need to get into material research Of course part my job is understand what client needs.

00:04:36: Can you think of an interesting listen from a institutional client that is actually very relevant for individual investors as well?

00:04:44: Think at the beginning, You also said part my job crisis reaction and especially in last say five to ten years.

00:04:51: That's been biggest lessons we learned when UK decided to leave European Union In morning thereafter markets were going crazy.

00:04:58: At this point just understand what it means for portfolio not be doing anything.

00:05:03: but how does that decision affect the positions you have in your portfolio, depending on them.

00:05:10: Either buy more shares of one company or sell shares from another

00:05:13: company.".

00:05:14: So you had to look at context

00:05:15: all the time?

00:05:16: Correct!

00:05:16: The right context and connecting dots.

00:05:20: and understand how does your portfolio react to external factors?

00:05:24: Might be political decisions, might be inflation interest rates.

00:05:28: Now the markets are very unstable as well.

00:05:30: what's the ratio between anticipation and reaction?

00:05:34: because there things you cannot anticipate.

00:05:36: Correct it is getting tough every day.

00:05:39: You can't prepare yourself for a number of scenarios but many scenarios in the past especially on the political side that were hard to anticipate.

00:05:49: You're confronted with a situation that you are not prepared for.

00:05:52: You need to, like break it down into several parts and understand what might mean for interest rates?

00:05:58: What does that mean for currencies or other market participants?

00:06:03: because they will react.

00:06:04: so we need some sort of anticipate what others may do in position yourself.

00:06:09: accordingly

00:06:10: Will say the last five months were more difficult from your career

00:06:17: More or less.

00:06:17: To be honest, twenty-twenty four and twenty-five were really challenging but this year it started very good.

00:06:25: We see that we are learning from...we're learning our lessons.

00:06:28: Many political things happen But market they don't react that intensely as I did before.

00:06:35: So markets do not trust politics anymore?

00:06:41: It's pure logic.

00:06:42: at the end of day Politics used to work like that but like for a couple of years now and depending on many administrations that came into power recently, that logic does not longer apply.

00:06:53: And what is making it so difficult right now to anticipate certain things...

00:06:57: Okay!

00:06:57: So its an example.

00:06:58: resilience?

00:07:00: Absolutely!!

00:07:01: That gets me back to my point at the beginning.

00:07:04: You also need understand What are your personal limits when you invest.

00:07:08: how many people say okay put my money in and then we just have a face of market downturn over like one or two percent, which is not much to be honest.

00:07:18: Or even five percent?

00:07:19: it's not much at the moment but many people don't start panicking.

00:07:24: You also had long-term view and not let yourself drag by fear?

00:07:27: Correct I mean beginning.

00:07:28: you understand.

00:07:29: why do you invest?

00:07:30: what does your goal when you invest?

00:07:31: Do you want to save money ?

00:07:33: Do you really want to invest for say long term goal retirement or something.

00:07:38: It's like your parameters that you set at the beginning and You just need to stick by it along the way.

00:07:44: When did you start investing for yourself?

00:07:46: I think, about ten years ago Or something...I started directly investing into shares And i didn't know much of what was stock market?

00:07:53: One common mistake many people make.

00:07:56: Then I started diversifying across instruments and sectors.

00:08:00: We want to learn from your years of experience.

00:08:02: now, ten years after with all the things that you've learned.

00:08:06: How do you start?

00:08:07: What can make or break your strategy?

00:08:10: and when do you know?

00:08:12: one fear takes over

00:08:13: once they understand what you want to Do.

00:08:15: for example never took long term goal.

00:08:17: I would started was just some simple year exchange traded funds.

00:08:21: They are on one hand very easy to understand And there not.

00:08:27: Not that expensive and you can buy and sell them pretty easily.

00:08:31: so it's a very good start.

00:08:33: And at the same time when you invest into a fund You directly get some level of diversification That usually do not get one.

00:08:39: It just invested in shares on an opportunity A manner

00:08:44: okay, So you be at the beginning because your curious and unexperienced?

00:08:47: You might have the temptation to look at your portfolio every day or every other day.

00:08:52: Yeah need only two.

00:08:53: check it everyday.

00:08:54: they are professionals who do that all day and research into markets, buy in sales shares.

00:09:01: Once you have your portfolio for example of exchange-traded funds I would not check the online banking every day.

00:09:08: to be honest it just makes you mad at end.

00:09:12: today

00:09:13: For someone building their very first portfolio like probably some our listeners what matters more products timing habits something else.

00:09:23: I would say habit is a very important thing.

00:09:25: Timing not so much, to be honest.

00:09:28: Habit and then have consistency in the strategy that you apply.

00:09:31: for example when you said okay i think technology's good sector to invest in it.

00:09:36: start investing into funds that focus on technology And after like four or five weeks bad news come up.

00:09:44: don't lose your head.

00:09:46: That just normal how markets work and how things react and evolve.

00:09:50: So it's important to be invested, I don't know what you're saying.

00:09:52: we put all your money into investments but need some level of investment anytime.

00:09:59: let us

00:10:00: stay a bit on this topic of emotions because many decisions are rarely purely rational.

00:10:06: can you remember moment when fear completely destroyed people judgment in the market?

00:10:13: Recently there were For example, there are some stocks that are currently in the news.

00:10:19: Big news every day is they're headlines.

00:10:21: but honestly I would not invest into those stocks.

00:10:23: But it also means a very public focus.

00:10:25: It also makes them very political at the end of today and that's bad for investments.

00:10:29: Also

00:10:29: if politics behinds?

00:10:30: Is about sign.

00:10:31: usually

00:10:32: its a bet sign when politics get involved.

00:10:34: There's also really bad someone when Public in general gets involved mean whenever company you You have professionals that up pretty good at what we're doing.

00:10:43: But once politics get involved, the normal economic logic that you as an investor would give to a company does not longer apply and it gets purely political.

00:10:53: What about energy sector?

00:10:55: Most of time is state-owned.

00:10:58: That's correct for very long times.

00:11:00: but I think this one of biggest shifts we see right now besides artificial intelligence.

00:11:05: On the other hand, energy sectors getting more publicly traded or more parts in infrastructure are serviced by public companies big companies that go public on the stock market.

00:11:16: or you have new players who come in and offer more solutions, new solutions.

00:11:21: And it's a very interesting and moving sector

00:11:24: right now.

00:11:25: Do you think investing is actually simpler?

00:11:28: Or more complicated than professionals?

00:11:30: make it look?

00:11:32: To be honest I think its bit simpler but really depends where we invest.

00:11:35: there are some parts they're sophisticated not open to general public like real estate, private equity and all that stuff.

00:11:45: I mean more.

00:11:46: it gets open to the public for example with the LTF product recently came out really helps a lot when business model behind of real estate infrastructure still pretty complex.

00:11:58: but good thing is you now have access what has become dramatically simple as investing in public markets, stocks, bonds and other stuff with the rise of exchange traded trends.

00:12:10: In the last decades.

00:12:11: there are so many ETFs currently that offer you some good strategies And then you can invest in basically any sector or country.

00:12:19: It's gotten pretty simple.

00:12:21: Social media might have a role on this and it made investing feel like entertainment.

00:12:27: Everyone's suddenly an expert.

00:12:29: crypto today AI stocks tomorrow.

00:12:31: Yes, some guy shouting about passive income

00:12:34: social media It's.

00:12:35: it's a good and bad thing at the same time.

00:12:37: on the one hand it really helps people to get more involved into the topic And you'll get closer to finance in investment topics as such But same time sometimes suggests that is very easy to make a lot of money.

00:12:51: That's never been the case and let's not go to be the case.

00:12:53: there's a saying.

00:12:55: It goes like, there's no such thing as a free lunch.

00:12:57: Any to understand when someone promises you high returns?

00:13:02: There was always higher risk involved.

00:13:04: so there is the dependency between risk and return.

00:13:07: ask yourself what do you accept?

00:13:09: What level of risks are you willing at end-of-the day to achieve certain goal?

00:13:15: When we invest money there is that risk where you lose your money.

00:13:18: So don't invest in money because it

00:13:21: can be risky Absolutely right!

00:13:22: And another saying which goes When you want to sleep well, you invest into bonds or saving accounts.

00:13:30: But if you want eat well... ...you need to invest in stocks.

00:13:33: Stocks have way more risk than bonds and money market products do.

00:13:38: Patrick thank you very much for joining us today.

00:13:40: I think one of the most interesting things from this conversation is realizing that there's no magic formula not even experts like you.

00:13:48: There are research discipline debate uncertainty but also long-term thinking and maybe that's reassuring for individual investors too.

00:13:57: Thank you for listening to Money Talks, until next time stay curious!