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Episode Transcript
Sharad Lal: Hi, everyone. Welcome to how to live. A podcast that explores ways to live a good life. I'm your host Sharad Lal. This is episode 55. Today we’re diving into a topic that concerns all of us - money. The age old question of how to make our hard-earned money work for us without stress to guide us through this financial journey we're joined by an exceptional guest. An award-winning entrepreneur and a banking Maverick, Mr. Samuel Rhee. Sam is not your typical finance expert.
He's the chairman and chief investment officer in Endowus, Asia's largest independent digital wealth platform. Prior to this, Sam was the CEO of Morgan Stanley investments, Asia. Here's what sets him apart. He's on a mission to change the way we think about finance and investments. Sam's 30 years of experience in institution investing across Singapore, Hong Kong, and London makes him a true luminary in this field. Finance and investments have always been shouted in complexity and hidden fees. But Sam, co-founder in Endowus, with a different vision. He's here to empower everyday people with financial literacy. Eliminate those sneaky fees and put clients' needs front and centre. Trust me. I've seen it in action. Sam is more than just a financial guru. He's a leading voice for transparency and investments featured in Forbes, Bloomberg CNBC, prestige magazine, and more.
His work within Endowus has gained him recognition from prestigious organisations, including the world economic forum. In today's conversation. Sam and I dig deep into what the purpose is. How he discovered a deeper purpose in the financial world. Delayed gratification. The power of prayer. The psychology of investing. All this explained in plain practical language. As you will notice this episode isn't only about investments. It's also about being purposeful at work.
Before getting into this episode, thank you very much for supporting the podcast folks. 125 countries listen to the podcast and we're in the top 5% in the world. Do consider following us and if you love the show please do rate us, thank you in advance. Now here's the conversation with the inspirational Samuel Rhee.
Hi, Sam, welcome to the How to live podcast. How are you doing this afternoon?
Sam Rhee: Great. It's great to be here, Sharad. I was so looking forward to this conversation. Today is a public holiday. I was really looking forward to it. I do a lot of other stuff, financial stuff, but yeah, this is something that's really fascinating. And I've heard some of your podcasts. How to live. It's fantastic. So great to be here.
Sharad Lal: Sam, congratulations on all the success. But before all the success, I know you grew up in Korea and England, you were back and forth. You were the son of a pastor. And then from that religious background, You went onto the world of finance. How did that shift come about?
Sam Rhee: Yeah, it's fascinating that you put the questions that way. First of all, Yeah, I have a unique background. So I'm originally from Korea. Soul. But I did go to England when I was just seven and it was partly because of my dad, as you said, he was pastor and he wanted to study theology properly and so the whole family moved over to England when he was seven. But then after the studies, we came back to Korea when I was 10. And then went back to study again when I was 12. So this back and forth was very unique.
And I'm what many people call a third culture kid. So not grounded in any single culture. Multicultural. I've walked and lived in London and Hong Kong and now a single pole where I've lived for 18 years. So it's a very diverse, multicultural, and very different language. As a pastor's son and growing up in a family with very strong values and faith was a very important part of that. Early childhood and growing up. It really is a very different life from the norm. And it's also because my father wasn't a typical pastor who just sold one church. He actually did a lot of work on campus. So universities. Growing and raising the future leaders. I can, that was a real, very different way to focus. And he started a lot of things, so it was very entrepreneurial. In the way he did his ministry as we call it.
So yeah, all those things shaped me. The faith, the values, the experiences. The different cultures I experienced. And it was an accidental journey into the field of finance. I studied economics and public admin. When I was at university. I was. I Went to Korea, which I hadn't visited in a long time, from England after my university finals. And somebody recommended an internship. I thought it was just a short stent. it was just going to be a holiday job.
And I would go back to do my graduation which was upcoming. And I ended up never going to my graduation and just staying and working. And then they shipped me to London. And so that was it. So it was an accidental entry. Into the world of finance and it just kept going from there.
Sharad Lal: Thank you for sharing that perspective. Being a TCK, we had a podcast episode on TCK. It's such a fascinating upbringing and it is, and there's more and more of us these days. It seems right.
And there's so many of us, and it's fascinating how you were, there were values and purpose. That was important, but there was entrepreneurship. And I found it interesting that when you get into banking and the industry gets a bad rap. You've been able to look at it. Purpose. So what does purpose mean to you and have you been able to do that?
Sam Rhee: Yeah, no purpose from the get-go is something that is very important for all of us. And I think people think that if you go into the space of finance, it's very difficult to find pub personal meaning but I don't think necessarily that's the case. I was fortunate enough to enter the financial service industry in the space of equities. for those that are not financial service background, people it's really basically related to the stock market.
So I'm covering companies that I analyse to see what they are good at. They're good investments and the record makes recommendations about them and then helps investors, especially institutional investors like sovereign wealth funds, GIC for example. Or pension funds. Helping them invest better.
What that means is that in the end, if you boil down financial markets and stock markets in particular, it really is about the underlying companies, the stocks that are listed. And if you want to make a good informed decision about how to invest in these companies, you need to understand a lot of things. First of all, you need to understand the actual companies.
Their strategy, their business model, the management, what decisions they make and how they made it in the past. You have to look at the history of the company to really understand where they've been, why they exist and where they're going with the strategy that they're implementing. But it's a lot of numbers as well.
So you have to look at the financial statements. You have to understand because the numbers tell you a story too. And that's the most beautiful thing about equities and stocks is that there is a story behind it. It's a story of people. Doing things that are creative or innovative and they're creating value. And we are riding on that value by making an investment into that company.
And understanding that early on in the journey and through, mentors and things that I figured out by myself, Really helped me really fall in love with the business I was in, which is really helping companies raise capital so they can invest and achieve their vision and dreams. And also allow investors to partake in that journey together. And that's the vesting part of investing and they're invested in the journey and they actually both get rewarded for that journey together. If they succeed, obviously there will be a lot of failures as well. But generally I think that's why it's much more meaningful than, for example, abstract financial stuff. Like for me, like fixed income is a little less and then like stuff like FX or derivatives or other things that are purely like a play on like financial instruments so that you can leverage and generate better returns.
Those things are much less interesting than the fundamentals of companies and why they succeed. That experience and that journey gave me a lot of learnings and laid the foundations of becoming an entrepreneur. And again, I was an accidental entrepreneur, a lot of things that I experienced in my career brought meaning and purpose, and also prepared me really well for my entrepreneurial journey.
Sharad Lal: I've never seen it described like this, where it's numbers, but behind it, there's a story. And there's a story about a company. There's a story about people who are coming together and creating something. And that becomes meaningful as you understand that story. That's right. And I found it interesting that then you took that and after that you became an entrepreneur. Yep. So I'd love to dig into entrepreneurship, but before I do that, just in your banking career, were there any moments where your purpose got challenged? And what was it? Some Fox in the road. And how did you go back to your values and decide.
Sam Rhee: I think purpose pod came maybe later in my career, because I think it's a journey for a young person to move from having very defined values or principles even, and you're developing a worldview, as a young person, as you shape your life, you're developing a world view and mine, obviously through my faith is founded on a Christian kind of certain values that shape that worldview and other things from outside my family and my friends.
And The world, the education, all those things shape your worldview. And I think it's something that takes time to fully reconcile my work and my career and the place that I'm placed in my life. With the values and the purpose and the worldview that I have, it's a process of integration, right? And where that is not aligned and it diverges too much. That's a source of major conflict and stress in my life. And so I think that's a journey that we took, we all take.
And I took throughout my career to try to integrate my beliefs, my faith, and my values with the work that I was doing. One of the things that I am a big believer in is delayed gratification. Right from a young age, I guess that was something that was innate in me because some of that is you're born with some of it is education and family values that created that. But delayed gratification, especially in this world of instant gratification. I think it's actually a super pal, Of individuals succeeding life as super powerful entrepreneurs and founders to succeed in their venture and in the workplace.
Also it's a superpower because very few people are going to be. You're not going to be competing with people because there's very few people that are applying this in their career. So as an example, when I was at Morgan Stanley for about 17 years. So I was there for a long time. Very rare these days. But everybody looks at that 17 and say, oh my God, you were doing the same thing forever.
But I worked at three different jobs there. And in different departments as well. The third one was actually a completely different subsidiary company. So I had to go through a whole interview process with external candidates and actually. Get selected. Even though it was part of Morgan Stanley, the asset management part was a completely different company. And that journey was a journey which may sound like, oh, Sam was going for it.
And, he did all this new stuff, but it was actually a journey of sacrifice because what I had to do every time I moved over. Was because I was successful in what I was doing before. I was actually giving up promotions. I was giving up that year's bonus, which is quite meaningful. Yeah. In, especially in investment banks, like Morgan Stanley. In order to try something new, for me, it was a process of giving up something this year so that I can actually try something new, learn, grow, improve.
And in a way, now that I look back on it and I wasn't as kind of crystal clear at the time, I just had this desire to do that. But now I look back at it. I was actually investing in the human capital that I possessed and building that human capital. Versus taking the financial capital. Right now.
And that building that human capital allows me to maximise financial capital over the long term. So giving up something this year means that I can actually have a bigger prize down the road. And that's what I mean by. Delayed gratification. And I think specifically when I was at Morgan Stanley and I continued to grow in my career, I had an opportunity. And this is the holy grail of any investment bank to make it to managing director the MD partner level at Morgan Stanley.
And to that point, I'd been working towards that ultimate goal within the organisation. And when that came about, I had the opportunity, but that was post the global financial crisis.
And my boss had told me and this other person who both stepped up to become an Asia co-head that there was only one spot. And so one of us had to give it up. And I think through a difficult process of self-reflection prayer and the support of my wife. I was able to let that go. That promotion was offered to my colleague. To go first. And that's another form of delayed gratification because what was more important to me at the time was that we became stronger, closer, more trusted partners in the future endeavours that we'll do together as co-heads. It was important because that was a friendship that I valued very much. And as a result. In the end it was a painful process, but I was able to do it and overcome it.
And that put me in a good position to succeed even more over the long term. And I gained a friend and a trusted partner and a supporter. Also when I was up for promotion for the CEO, he was very supportive. So all those things, I think about things that I learned and experienced and. That's what aligns the value and the purpose with the work that I do day to day.
Sharad Lal: What a powerful story, Sam. There's so many questions. And you are. Your whole team of delayed gratification that you talked about through your career. Was there a stage that you connected with it and then started doing it consciously or did it just happen? Like, how do you know you were doing it? Because this was something you had from childhood when you connected with it.
Sam Rhee: I call it delayed gratification, but it was, there are selfish motivations as well, because in a way, when you are letting go of that successful position in Korea and saying that, Hey, I'm going to go for a new challenge. It's not an easy decision because what you're doing also is actually you're letting go of the existing team that you're working with.
You're like betraying that right. Tribe. So it's definitely not an easy thing. But what you can do is to prepare the grounds so that when you move on. The rest of the team is in a position to continue to succeed. And that was the first thing. The second thing is that. No, it's not driven by self-defeating selfish motivation or the wrong motivations of, Hey, if I move, I'm going to get promoted.
I'm going to have a fancy title. Which is often the motivation for many people moving companies, but I was moving within the company, so I wasn't going to get a promotion. I was actually going to get a demotion. Which is right. Almost. And so making sure that my motivations are driven by the right motives and not the wrong motives.
And then the third one is really about focusing on the long term. What am I going after? For me? It was, I wanted to continue to grow. I wanted to continue to learn, continue to take on more responsibilities in different areas. And the final goal was to move to Morgan Stanley asset management, where I was actually advising investors from the sell side as they call it. To advise them, give them good research or give recommendations, but I wanted to actually be on the other side, managing the money and making those executive decisions on how to invest and generating better returns because of pride.
I thought that I could do a better job. Obviously right. So when I'm young, when you're young, you can afford to be a bit prideful. But you learn later on. That you actually are not that different from everybody else. And so you gain humility, which is another massive superpower that you gain as you grow older. And so that was the journey for me, was to reach a final goal that was very clear, which was to actually manage the money of investing. And I was working towards that goal.
Sharad Lal: Yep. In all this Sometimes there are conflicting values. There is loyalty to the team, but doing delayed gratification in all this, you have to take yourself out and assess and think about it and then make a conscious decision. How do you do that? And what age have you started doing that in.
Sam Rhee: Oh, I don't know what Asia I started doing and I'm still learning. I'm still trying to do that. Especially in the busy-ness of life and whether you're in a career or whether you're doing a startup, whether you're doing a podcast like yourself, It's there's so much that comes on you, especially with a family and young kids.
So I think you have to be purposeful. I think you have to be intentional and really carve out time for yourself. And in a way doing that is for the sake of your family, for the sake of your colleagues and for your company in the long run again, delayed gratification, right? You make sets and sacrifices. So you can carve out the time and be intentional about reflection about meditation. Really thinking through things because every day in most of our career in life, we. We were geared towards execution, we're like executing, making decisions.
We're in meetings. We're like doing things is all about doing things. And brain waves are different when we start reflecting or thinking through. A certain situation and it's not just work. It's about relationships. It's about, Why am I doing what I'm doing? Am I doing it in the right way? What should I be doing?
All these are philosophical, almost questions that we should be throwing at ourselves. And I think the modern person doesn't have enough time. But more importantly, we're not purposeful or intentional about the time that we have. And so we should be intentional and carve out that time so that we can actually spend time to reflect.
And that actually is an amazing kind of. Step function, growth opportunity because only then can we figure out what we're actually doing wrong? What we can learn from the mistakes we've made, what we can learn from the successes that we've had.
Sharad Lal: Is there a ritual or a thing like every Saturday morning you do something or is it writing or what's the way you make sure that you at least have this time set for yourself?
Sam Rhee: Yeah. I'm inherently a very lazy person. I am prone to procrastination. So I have to be intentional and find discipline. In processes and routines. So every morning I try to wake up early and actually go through a routine of. Exercise. Riding a bike, walking or swimming. Those are the three things because I have a dodgy knee. So those are the things that are less stressful on my legs.
And then also, just spending time. Meditating and, Doing my faith routine. And prayer and stuff. And then, focusing on the things that are the priorities for the day and that early morning routine is what helps me a lot. And some days I obviously miss it, some days I skip, but I am not hard on myself. I tried to get back onto it very quickly. then just taking breaks to reflect. carving out like a half a day during the week, or like on the weekend, like non-negotiable Sundays.
I just don't meet people that don't do anything. And I just spend time for myself or time for my family. You have to carve it out. And then put it in the calendar, the Google calendar. So other people can see it. And can be respectful to that. Recently, I've been very fascinated by the concept of prayer. And you touched upon it two, three times.
Sharad Lal: I'd love to understand from you, what does prayer mean to you and what is its role in life and in work?
Sam Rhee: Yeah. I come from a Christian background, so I'll share what my thoughts of prayer are. Some of it could be universally applicable. Some may be very specific to the Christian concept. for me because Christianity actually believes in a deity right. There is a greater being and that great being the way we define it is a being that is love. And we are his children. And like a father and a child.
That's the kind of relationship I have with my father. God. It's not about a kid saying, Hey dad, I want this. I want that. Buy me. This, buy me that's a formal prayer too. But That's when you're like a really young baby kid and you're maybe immature, you don't do that when you're 18, you don't do that when you're 25 or 30, so there is a journey where your faith is young. And your relationship is not that established and it's like a kid, then you may do those things, but really what is that. Prayer is a conversation with your father. That's the way you should see it.
The way I see it is a conversation. And when you have a normal conversation, it's sharing life. It's also through the conversations you learn about your father, right? You learn about his journey, right? Our own. Think about our own physical father. His journey of life that we didn't know when we were young, but as we grow old, they'll be like, oh, my dad went through this.
He went through the same struggles. Maybe he understands me better. And all being a father, only when we have children and we're a father ourselves to understand what a fuck. When thrown off. This one through. So that's the journey of understanding. You know what he's about, what are the things important to him? And then he loves me and I love my father. I want to do good right in front of my father.
I want to do the things that he thinks are important. And so that's an alignment process and the process of prayer is actually a process of us aligning ourselves to in Christian speakers God's will. Trying to understand God's will in my life because he created me and he has certain reasons why he sent me to this earth.
And so that's figuring that out. And understanding why I'm here. What's the purpose? What's the meaning? What are the most important things in my life? And the final thing is that at the end of my life, I'm not going to be able to take it. My riches, my house. And we're going to be gone. If I believe in eternal life, if I believe in I haven't or whatever that is. You should align with that. You should have that eternal perspective in your day-to-day life today. That prayer process is an important process for me to align to that.
Sharad lal: As you described it, it seemed like such an important process, even for people who are not too religious, such an important process too. Understand yourself and your values. and clarifying who you really are.
Sam Rhee: So that's when these foxes in the roads come you're clear about your purpose, about what you're meant to do, and your decision-making becomes a lot in line with your values. Absolutely. it doesn't matter whether it's a religion or a belief system, or, whether it's a worldview that you've created, that's, you just need alignment because the moment your life is misaligned. That's what causes unhappiness, stress and problems in your life and your relationships.
Sharad lal: Speaking with alignment. What brought about it? You started in Dallas. Yeah. Of course it's done so well in terms of The largest independent wealth platform in Asia, but what brought it about what was the issue and how did you go about it? Yeah.
Sam Rhee: Yeah. Yeah, I guess it goes back to the purpose and the meaning and why I felt I was brought into the financial service industry. And I keep saying financial service because we keep leaving out the woods service. We keep saying it's finances if it's an abstract term, but no, every single financial company is a financial service company and we are here to serve our clients.
And I think that is turned on its head. These days, clients are here to serve the companies and their shareholders. And We actually should be going back to our roots of trying to serve our clients. And that's where it comes from because I was a professional investor managing 10 billions of assets. I Get a lot of fever because I get served by great investment banks and brokers.
I give you good advice, access to great products and cost at a cost that is really low. GIC does not pay really high fees. They negotiate lower fees and get access to better products. And so that's what I felt was missing for individual investors. And I'd wanted to solve this problem of investing for individuals. But the most important thing is why do you invest. And one of the most important financial goals that every individual has is, if they realise they're struggling, and if they don't realise that it's a massive problem for them, that's gonna hit them at some point.
It's the problem of retirement. And how can we save enough for retirement? What we call retirement adequacy. This is a massive problem because what it leads to is this thing called old age poverty. Because people are going to walk all their lives, they realise at the end of the journey that Hey I'm not gonna be able to walk anymore. And I don't have enough money saved up. What does that mean? It means that the quality of life will suffer. And that's the biggest human tragedy you can imagine.
And so trying to find a way to solve that, obviously there is no silver bullet. We have to do what we can. And so Dallas is born from that mission of trying to make a dent. Help individuals empower them individuals and families to reach their most important financial goals over the long-term.
The reason we wanted to do that is because there is a right way to invest. There is a right way to do things and I don't think enough people know. And so on the supply side, we need to solve the problem as a financial service company. But on the demand side, we need to help individuals and empower them through financial education and improving financial literacy.
Sharad Lal: Thinking about how people should think about investments. From my personal journey, it was. Trying to do some cool stuff and make quick bucks doing boring compounding. Kind of instruments. What is your investment philosophy and how has that changed over the time?
Sam Rhee: So my journey began with me becoming a sophisticated professional investor, managing other people's money. And when I made my own money during that journey. I was managing my investments, personal investments in a very different way. From the institutional kind of professional money that I was running.
So I made the exact same mistakes. And mistakes everybody, every other retail investor makes. Which is, I go off to the hottest stock or the, my friend's recommendation or, I buy my friends like a startup. Invest in it. And I invest too much. And I blew my money. Those kinds of journeys have all happened. And so it was again, a process of alignment, right?
Like what I believe and what I do is a gap and therefore, how can I invest properly? My own personal money. Like I would manage my professional money. And that was the actual journey that allowed me to go in, to do what in Dallas is doing because in Dallas is all about aligning individuals to institutional frameworks of investing, right?
Using diversification using asset allocation, not trying to find the hottest, latest stock or tip. I'm not trying to generate 50% in two days. Yeah, which is the wrong incentive system. So there is a difference between saving and investing. So I want to start with a definitional thing. saving is really just putting aside money. saving means that you don't want to lose money.
And so you normally put it just in a fixed deposit or something very safe. What that means is that in this environment, people say, oh, you get a great interest rate of three, 4%. And before it was as low as one. Or below zero point something percent. But you have to understand interest rates are a reflection of inflation. Environment at the time.
So back then inflation was two and you're getting 0.8. 1% or less. So it was blue inflation. that value of the money is eroding every day in real terms. These days it's the same thing. Inflation was 6% and we're getting 3%, 4%.
And we're very happy that it's up from one. But actually inflation is six. So you're actually in minus three now, or minus two, which means that you're actually losing even more money, even though you're getting high interest. So you have to really understand the concept of, Purchasing power, the ability to, to what can you buy with the same amount of money in the future? The only way to protect the value of your money over the long term is to invest it. And when you invest as opposed to saving you are actually taking risk.
And because you're taking risk, you're asking that I need that to return or higher returns for taking that risk. And normally you are given higher returns, whether it's bonds, which are not riskier than fixed deposits, but safe. And therefore, as long as the company doesn't go bankrupt and you get your money back, you're generating five, 6% these days. And then you actually take on even more risk in the equity market and say, Hey, long-term equity markets gave you seven to 10%. But it's more volatile and it's more risky. So you allocate the right amount of money in the right risk bucket.
How much do I need to grow my pod in order that I can secure my retirement, buy a house, buy a car, send my kids to college. So you map it out from the other side, not the return side, your investment objectives should never be. I want to generate 10% or 20%.
It should be. What am I investing for? And then what is the risk I need to take to generate the returns I need. To meet that goal. So it's actually called a liabilities driven or goal-based investing process. And that is the way institutions do it.
And if you do well, then you can take less risk. If you do badly, like last year and this year markets are less. Friendly, then you actually up your wrist a little bit more because you know that over the long term. That this is the returns that you're expected to generate at that level of risk, but it's a very difficult concept because we are again, too shortsighted. And this is a bit about delayed gratification as well.
So it brings us back to that delayed gratification that, if you want to be a good investor, you have to be focused on delayed gratification because it's not about the short term. It's about the long term and over the long term taking the appropriate real risk we'll generate the right returns for you.
Shard Lal: What role do you think emotions play and how can we manage it?
Sam Rhee: Emotions while investing. Yeah. Emotions are critical. People talk about greed and fear. There's also a lot of comfort or stress depending on how the investment is doing. So emotions are very important and are an integral part of the investing process.
But what's more important is those emotions. All the other underlying drivers of how we behave. So we're driven by emotion to behave a certain way. And that's why there's a whole field.
These days of what's called behavioural economics. Where like the few people that actually won a Nobel. Economics prize on it, thinking fast, thinking slow. Daniel Cannon and then Richard Ella, or still won a Nobel prize on it and wrote a book. Not the easiest books to read, but you can write some read summaries.
And that is actually really fascinating, because for example we have biases. It's like cognitive biases that hinder us from being good investors. you'll learn a ton of it.
Risk aversion, a lot of biases that we have. And so that is helpful because we understand our own motivations. What drives markets? Is also a lot of behaviour. Any emotions behind it. And if we can remove certain biases that we have built Inside of us or things that come naturally to us, like we take too much risk and not get compensated for it.
We buy crypto and the latest like memes, stock, and hope that we generate 200%. That's not investing, that's gambling, trading and gambling, all this stuff. Speculation. Investing is really about trying to apply a tried and tested evidence-based scientific way of investing things that help you improve your chance of returns.
That's what scientific processes mean, right? Improve the chance of success, improve the chance of returns. And there are things that will help you get there. And financial advisers are there, especially if they can be independent. Not be paid by anybody else. And really working towards the client's best interest and then understanding the client's life circumstances and helping them behave in the right way by advising them in the right way. Those emotions can be overcome.
Sharad Lal: Very interesting. And I think like you said, people can look it up. There's lots of versions. There's So many concepts. Which we need to be aware of because. That'll help us. Absolutely. The funny thing is sometimes when we are aware of these. We keep making the same mistake again. So what are some of these common mistakes that we know that I don't want to make, but I keep making that you've seen people making? How do you break out of that loop?
Sam Rhee: They're all processes again. It's about discipline. It's about processes and systems and routines that you've put in place. And. One of the most common ones that people talk about is, this concept of dollar cost averaging. Or regular savings plan RSP. And to be honest with you, if you look at the long history of financial markets, And you put, pick any spot in the global stock market and say, Hey, was it better to pro. Put all your lump sum money, like your whole investments, even at the peak of a cycle, you put that money in. Versus dripping it in over a long period of time. The lump sum always wins. From a scientific mathematical conclusion. Like much, much higher probability and the majority of outcomes, if you invested a bigger lump sum earlier. Because of the way markets have gone over the past a hundred years.
And because it's a compounding nature, if you invested earlier, that's the most important thing you can do, even if it's a small amount, a lump sum earlier is better, but. There is an emotional risk and a massive kind of hindrance to us actually doing that because we worry that after we invest, we will lose money. We had this study about the worst investor in the whole history of mankind who invested at the peak of the market every decade. So this person saved up a hundred, that hypothetical person saved up a hundred thousand dollars. Four. A decade invested at the absolute peak of the 1970s.
As soon as he invested the market fell 50%. During the Nixon resignation oil embargo, et cetera. And then saved up all his money until the eighties and that was black Monday and it fell another 40% the next day. And that saves up another hundred thousand invested at the peak of the Dot com bubble bursting 99. And the market fell 50 something percent.
And then he saved up another hundred thousand invested in the global financial crisis. But if you look at that, the guy invested $500,000, he's made a 10 X return. Wow. And your average return annually is still eight, nine, 10%, depending on which period at the bottom of the global financial crisis, he would invest 400,000 and still would have been. Generating six, 7%. So the power of compounding and the power of markets itself, because the market is not just some random collection of. The copy place around the corner that closed down during COVID, it's actually the best companies in the world that have proven track record of profitability, have the best technology, the best talent, the best management, and. Have grown to be the biggest companies in the world.
And therefore the market is a representation of those good companies. And there's a natural mechanism through which bad companies become smaller. And the good company is going to grow and become a bigger portion of that market. And so it's a natural selection process and the markets as a result, long-term always go up. Over the long term. Not short term.
I told you about the decade every time, 30, 40, 50% last year, 20 something percent. But it's back up again this year. Who expected the markets to be up double digits this year? So, you have to understand what markets are. You know how it behaves and what are the things I can do to help myself succeed. And how can I overcome these fears and the behavioural biases that I have.
But the worst thing is what a lot of people do, which is you chase the market on the way up and you buy at the top and then you sell it at the bottom because you panic and you start selling when things are actually already down 20, 30, 50%.
And we actually want to avoid the worst outcomes, the bad mistakes we make. And we can't always do the most optimal thing, but dollar cost averaging is a process or regular savings as a process, through which we overcome our emotions, improve our behaviour. Which should, over time, improve our outcomes.
Sharaad Lal: It's such a wonderful point.
And I think the key takeaway is time, I remember reading somewhere about Warren buffet. Of course his investment philosophy is good, but one of the biggest reasons is he's been investing for six decades. Time.
Yes. And that's compounded and compounded everything. Absolutely. So there is a phrase time in the market, not timing the market. So that's a really good phrase to keep in mind because it's. The more time you have in your investment in the market is actually going to give you a better chance of success, timing the market like buying and selling and trading.
It reduces the probability of success. Okay, Sam, as we are closing out, thank you very much for sharing your wisdom. What's the one piece of advice that you would love to give people about investing?
Sam Rhee: You need to start getting going. There is an advantage. Of starting earlier. That's so important. And because of this thing called the power of compounding, starting earlier is the best thing you can do for yourself. If you have children that you can start investing for your children early on and have a separate pot, you can even do that with your CPF central Provident fund investments game. So all those things are things that you can do to get going really. You need to invest, not just save.
Sharad Lal: Absolutely. That's such powerful advice. Dawning a little bit to the personal bit before we go off. We talked about purpose.
We talked about life. I had this question that I asked many people and I thought, let me ask you as well. At the end of your life, how would you know you've lived a good life?
Sam Rhee: Okay. This there's two ways to look at it. Who are you living for? I live for. I Say, this is the thing I can't not bring in religion. Something like this. And yeah, so I live for my God and for my family and for my friends. And so all of those things what's consistent are not the religious part or other things.
It actually is all driven by relationships. My life is for me all about my relationships. That's what I value the most. And so meeting a new Shirad is about developing a relationship with you. Getting to know each other, understanding each other, learning from each other. So that relationship is critical.
Employee is more important than me succeeding with my company is more important than me making money. I think these relationships are the foundations of my happiness and also my success. So at the end of my life, I want to take stock of my relationships. One of the things that I've done well is what are the relationships that matter?
What are the relationships that have stayed with me and have really helped me succeed in life and the way that I value it. And the most important relationship is the audience of one of God for me as well. And so God family, friends, It's all about relationships for me.
Sharad Lal: What a wonderful perspective, Sam.
Thank you very much for spending time with us. It's been a complete privilege having you on the show. And I'm sure many people listening will learn so much, not only about investing, but about how to live their lives. So thank you very much for sharing your wisdom with us.
Sam Rhee: Thank you so much, Sharad. It's really a real pleasure. And, I don't know if I did everything you say that I did, just sharing my life and what I've learned is a joy. Yeah. Thank you so much for having me. Thank you.
Sharad Lal: Thank you, Sam, for such a beautiful and useful conversation. For more on Sam, you can reach him on LinkedIn. I will put up a link.
He has an action step for all of us. What does prayer mean to you? Do you pray? How has it evolved over time? What can prayer do to you? How can it be a tool to align yourself with your values? How can you bring in your religious beliefs in helping you become who you really are and who you're meant to be? I think prayer is such an important aspect in self exploration.
So as an action step for this episode, let's all think about our prayers. And what we can do to make it a more important part in our life. Best of luck. I hope you enjoyed this episode. The next episode will drop two weeks from now on December 5th. To join us for that Didn't next time have a wonderful day ahead bye bye
Sharad Lal: Hi, everyone. Welcome to how to live. A podcast that explores ways to live a good life. I'm your host Sharad Lal. This is episode 55. Today we’re diving into a topic that concerns all of us - money. The age old question of how to make our hard-earned money work for us without stress to guide us through this financial journey we're joined by an exceptional guest. An award-winning entrepreneur and a banking Maverick, Mr. Samuel Rhee. Sam is not your typical finance expert.
He's the chairman and chief investment officer in Endowus, Asia's largest independent digital wealth platform. Prior to this, Sam was the CEO of Morgan Stanley investments, Asia. Here's what sets him apart. He's on a mission to change the way we think about finance and investments. Sam's 30 years of experience in institution investing across Singapore, Hong Kong, and London makes him a true luminary in this field. Finance and investments have always been shouted in complexity and hidden fees. But Sam, co-founder in Endowus, with a different vision. He's here to empower everyday people with financial literacy. Eliminate those sneaky fees and put clients' needs front and centre. Trust me. I've seen it in action. Sam is more than just a financial guru. He's a leading voice for transparency and investments featured in Forbes, Bloomberg CNBC, prestige magazine, and more.
His work within Endowus has gained him recognition from prestigious organisations, including the world economic forum. In today's conversation. Sam and I dig deep into what the purpose is. How he discovered a deeper purpose in the financial world. Delayed gratification. The power of prayer. The psychology of investing. All this explained in plain practical language. As you will notice this episode isn't only about investments. It's also about being purposeful at work.
Before getting into this episode, thank you very much for supporting the podcast folks. 125 countries listen to the podcast and we're in the top 5% in the world. Do consider following us and if you love the show please do rate us, thank you in advance. Now here's the conversation with the inspirational Samuel Rhee.
Hi, Sam, welcome to the How to live podcast. How are you doing this afternoon?
Sam Rhee: Great. It's great to be here, Sharad. I was so looking forward to this conversation. Today is a public holiday. I was really looking forward to it. I do a lot of other stuff, financial stuff, but yeah, this is something that's really fascinating. And I've heard some of your podcasts. How to live. It's fantastic. So great to be here.
Sharad Lal: Sam, congratulations on all the success. But before all the success, I know you grew up in Korea and England, you were back and forth. You were the son of a pastor. And then from that religious background, You went onto the world of finance. How did that shift come about?
Sam Rhee: Yeah, it's fascinating that you put the questions that way. First of all, Yeah, I have a unique background. So I'm originally from Korea. Soul. But I did go to England when I was just seven and it was partly because of my dad, as you said, he was pastor and he wanted to study theology properly and so the whole family moved over to England when he was seven. But then after the studies, we came back to Korea when I was 10. And then went back to study again when I was 12. So this back and forth was very unique.
And I'm what many people call a third culture kid. So not grounded in any single culture. Multicultural. I've walked and lived in London and Hong Kong and now a single pole where I've lived for 18 years. So it's a very diverse, multicultural, and very different language. As a pastor's son and growing up in a family with very strong values and faith was a very important part of that. Early childhood and growing up. It really is a very different life from the norm. And it's also because my father wasn't a typical pastor who just sold one church. He actually did a lot of work on campus. So universities. Growing and raising the future leaders. I can, that was a real, very different way to focus. And he started a lot of things, so it was very entrepreneurial. In the way he did his ministry as we call it.
So yeah, all those things shaped me. The faith, the values, the experiences. The different cultures I experienced. And it was an accidental journey into the field of finance. I studied economics and public admin. When I was at university. I was. I Went to Korea, which I hadn't visited in a long time, from England after my university finals. And somebody recommended an internship. I thought it was just a short stent. it was just going to be a holiday job.
And I would go back to do my graduation which was upcoming. And I ended up never going to my graduation and just staying and working. And then they shipped me to London. And so that was it. So it was an accidental entry. Into the world of finance and it just kept going from there.
Sharad Lal: Thank you for sharing that perspective. Being a TCK, we had a podcast episode on TCK. It's such a fascinating upbringing and it is, and there's more and more of us these days. It seems right.
And there's so many of us, and it's fascinating how you were, there were values and purpose. That was important, but there was entrepreneurship. And I found it interesting that when you get into banking and the industry gets a bad rap. You've been able to look at it. Purpose. So what does purpose mean to you and have you been able to do that?
Sam Rhee: Yeah, no purpose from the get-go is something that is very important for all of us. And I think people think that if you go into the space of finance, it's very difficult to find pub personal meaning but I don't think necessarily that's the case. I was fortunate enough to enter the financial service industry in the space of equities. for those that are not financial service background, people it's really basically related to the stock market.
So I'm covering companies that I analyse to see what they are good at. They're good investments and the record makes recommendations about them and then helps investors, especially institutional investors like sovereign wealth funds, GIC for example. Or pension funds. Helping them invest better.
What that means is that in the end, if you boil down financial markets and stock markets in particular, it really is about the underlying companies, the stocks that are listed. And if you want to make a good informed decision about how to invest in these companies, you need to understand a lot of things. First of all, you need to understand the actual companies.
Their strategy, their business model, the management, what decisions they make and how they made it in the past. You have to look at the history of the company to really understand where they've been, why they exist and where they're going with the strategy that they're implementing. But it's a lot of numbers as well.
So you have to look at the financial statements. You have to understand because the numbers tell you a story too. And that's the most beautiful thing about equities and stocks is that there is a story behind it. It's a story of people. Doing things that are creative or innovative and they're creating value. And we are riding on that value by making an investment into that company.
And understanding that early on in the journey and through, mentors and things that I figured out by myself, Really helped me really fall in love with the business I was in, which is really helping companies raise capital so they can invest and achieve their vision and dreams. And also allow investors to partake in that journey together. And that's the vesting part of investing and they're invested in the journey and they actually both get rewarded for that journey together. If they succeed, obviously there will be a lot of failures as well. But generally I think that's why it's much more meaningful than, for example, abstract financial stuff. Like for me, like fixed income is a little less and then like stuff like FX or derivatives or other things that are purely like a play on like financial instruments so that you can leverage and generate better returns.
Those things are much less interesting than the fundamentals of companies and why they succeed. That experience and that journey gave me a lot of learnings and laid the foundations of becoming an entrepreneur. And again, I was an accidental entrepreneur, a lot of things that I experienced in my career brought meaning and purpose, and also prepared me really well for my entrepreneurial journey.
Sharad Lal: I've never seen it described like this, where it's numbers, but behind it, there's a story. And there's a story about a company. There's a story about people who are coming together and creating something. And that becomes meaningful as you understand that story. That's right. And I found it interesting that then you took that and after that you became an entrepreneur. Yep. So I'd love to dig into entrepreneurship, but before I do that, just in your banking career, were there any moments where your purpose got challenged? And what was it? Some Fox in the road. And how did you go back to your values and decide.
Sam Rhee: I think purpose pod came maybe later in my career, because I think it's a journey for a young person to move from having very defined values or principles even, and you're developing a worldview, as a young person, as you shape your life, you're developing a world view and mine, obviously through my faith is founded on a Christian kind of certain values that shape that worldview and other things from outside my family and my friends.
And The world, the education, all those things shape your worldview. And I think it's something that takes time to fully reconcile my work and my career and the place that I'm placed in my life. With the values and the purpose and the worldview that I have, it's a process of integration, right? And where that is not aligned and it diverges too much. That's a source of major conflict and stress in my life. And so I think that's a journey that we took, we all take.
And I took throughout my career to try to integrate my beliefs, my faith, and my values with the work that I was doing. One of the things that I am a big believer in is delayed gratification. Right from a young age, I guess that was something that was innate in me because some of that is you're born with some of it is education and family values that created that. But delayed gratification, especially in this world of instant gratification. I think it's actually a super pal, Of individuals succeeding life as super powerful entrepreneurs and founders to succeed in their venture and in the workplace.
Also it's a superpower because very few people are going to be. You're not going to be competing with people because there's very few people that are applying this in their career. So as an example, when I was at Morgan Stanley for about 17 years. So I was there for a long time. Very rare these days. But everybody looks at that 17 and say, oh my God, you were doing the same thing forever.
But I worked at three different jobs there. And in different departments as well. The third one was actually a completely different subsidiary company. So I had to go through a whole interview process with external candidates and actually. Get selected. Even though it was part of Morgan Stanley, the asset management part was a completely different company. And that journey was a journey which may sound like, oh, Sam was going for it.
And, he did all this new stuff, but it was actually a journey of sacrifice because what I had to do every time I moved over. Was because I was successful in what I was doing before. I was actually giving up promotions. I was giving up that year's bonus, which is quite meaningful. Yeah. In, especially in investment banks, like Morgan Stanley. In order to try something new, for me, it was a process of giving up something this year so that I can actually try something new, learn, grow, improve.
And in a way, now that I look back on it and I wasn't as kind of crystal clear at the time, I just had this desire to do that. But now I look back at it. I was actually investing in the human capital that I possessed and building that human capital. Versus taking the financial capital. Right now.
And that building that human capital allows me to maximise financial capital over the long term. So giving up something this year means that I can actually have a bigger prize down the road. And that's what I mean by. Delayed gratification. And I think specifically when I was at Morgan Stanley and I continued to grow in my career, I had an opportunity. And this is the holy grail of any investment bank to make it to managing director the MD partner level at Morgan Stanley.
And to that point, I'd been working towards that ultimate goal within the organisation. And when that came about, I had the opportunity, but that was post the global financial crisis.
And my boss had told me and this other person who both stepped up to become an Asia co-head that there was only one spot. And so one of us had to give it up. And I think through a difficult process of self-reflection prayer and the support of my wife. I was able to let that go. That promotion was offered to my colleague. To go first. And that's another form of delayed gratification because what was more important to me at the time was that we became stronger, closer, more trusted partners in the future endeavours that we'll do together as co-heads. It was important because that was a friendship that I valued very much. And as a result. In the end it was a painful process, but I was able to do it and overcome it.
And that put me in a good position to succeed even more over the long term. And I gained a friend and a trusted partner and a supporter. Also when I was up for promotion for the CEO, he was very supportive. So all those things, I think about things that I learned and experienced and. That's what aligns the value and the purpose with the work that I do day to day.
Sharad Lal: What a powerful story, Sam. There's so many questions. And you are. Your whole team of delayed gratification that you talked about through your career. Was there a stage that you connected with it and then started doing it consciously or did it just happen? Like, how do you know you were doing it? Because this was something you had from childhood when you connected with it.
Sam Rhee: I call it delayed gratification, but it was, there are selfish motivations as well, because in a way, when you are letting go of that successful position in Korea and saying that, Hey, I'm going to go for a new challenge. It's not an easy decision because what you're doing also is actually you're letting go of the existing team that you're working with.
You're like betraying that right. Tribe. So it's definitely not an easy thing. But what you can do is to prepare the grounds so that when you move on. The rest of the team is in a position to continue to succeed. And that was the first thing. The second thing is that. No, it's not driven by self-defeating selfish motivation or the wrong motivations of, Hey, if I move, I'm going to get promoted.
I'm going to have a fancy title. Which is often the motivation for many people moving companies, but I was moving within the company, so I wasn't going to get a promotion. I was actually going to get a demotion. Which is right. Almost. And so making sure that my motivations are driven by the right motives and not the wrong motives.
And then the third one is really about focusing on the long term. What am I going after? For me? It was, I wanted to continue to grow. I wanted to continue to learn, continue to take on more responsibilities in different areas. And the final goal was to move to Morgan Stanley asset management, where I was actually advising investors from the sell side as they call it. To advise them, give them good research or give recommendations, but I wanted to actually be on the other side, managing the money and making those executive decisions on how to invest and generating better returns because of pride.
I thought that I could do a better job. Obviously right. So when I'm young, when you're young, you can afford to be a bit prideful. But you learn later on. That you actually are not that different from everybody else. And so you gain humility, which is another massive superpower that you gain as you grow older. And so that was the journey for me, was to reach a final goal that was very clear, which was to actually manage the money of investing. And I was working towards that goal.
Sharad Lal: Yep. In all this Sometimes there are conflicting values. There is loyalty to the team, but doing delayed gratification in all this, you have to take yourself out and assess and think about it and then make a conscious decision. How do you do that? And what age have you started doing that in.
Sam Rhee: Oh, I don't know what Asia I started doing and I'm still learning. I'm still trying to do that. Especially in the busy-ness of life and whether you're in a career or whether you're doing a startup, whether you're doing a podcast like yourself, It's there's so much that comes on you, especially with a family and young kids.
So I think you have to be purposeful. I think you have to be intentional and really carve out time for yourself. And in a way doing that is for the sake of your family, for the sake of your colleagues and for your company in the long run again, delayed gratification, right? You make sets and sacrifices. So you can carve out the time and be intentional about reflection about meditation. Really thinking through things because every day in most of our career in life, we. We were geared towards execution, we're like executing, making decisions.
We're in meetings. We're like doing things is all about doing things. And brain waves are different when we start reflecting or thinking through. A certain situation and it's not just work. It's about relationships. It's about, Why am I doing what I'm doing? Am I doing it in the right way? What should I be doing?
All these are philosophical, almost questions that we should be throwing at ourselves. And I think the modern person doesn't have enough time. But more importantly, we're not purposeful or intentional about the time that we have. And so we should be intentional and carve out that time so that we can actually spend time to reflect.
And that actually is an amazing kind of. Step function, growth opportunity because only then can we figure out what we're actually doing wrong? What we can learn from the mistakes we've made, what we can learn from the successes that we've had.
Sharad Lal: Is there a ritual or a thing like every Saturday morning you do something or is it writing or what's the way you make sure that you at least have this time set for yourself?
Sam Rhee: Yeah. I'm inherently a very lazy person. I am prone to procrastination. So I have to be intentional and find discipline. In processes and routines. So every morning I try to wake up early and actually go through a routine of. Exercise. Riding a bike, walking or swimming. Those are the three things because I have a dodgy knee. So those are the things that are less stressful on my legs.
And then also, just spending time. Meditating and, Doing my faith routine. And prayer and stuff. And then, focusing on the things that are the priorities for the day and that early morning routine is what helps me a lot. And some days I obviously miss it, some days I skip, but I am not hard on myself. I tried to get back onto it very quickly. then just taking breaks to reflect. carving out like a half a day during the week, or like on the weekend, like non-negotiable Sundays.
I just don't meet people that don't do anything. And I just spend time for myself or time for my family. You have to carve it out. And then put it in the calendar, the Google calendar. So other people can see it. And can be respectful to that. Recently, I've been very fascinated by the concept of prayer. And you touched upon it two, three times.
Sharad Lal: I'd love to understand from you, what does prayer mean to you and what is its role in life and in work?
Sam Rhee: Yeah. I come from a Christian background, so I'll share what my thoughts of prayer are. Some of it could be universally applicable. Some may be very specific to the Christian concept. for me because Christianity actually believes in a deity right. There is a greater being and that great being the way we define it is a being that is love. And we are his children. And like a father and a child.
That's the kind of relationship I have with my father. God. It's not about a kid saying, Hey dad, I want this. I want that. Buy me. This, buy me that's a formal prayer too. But That's when you're like a really young baby kid and you're maybe immature, you don't do that when you're 18, you don't do that when you're 25 or 30, so there is a journey where your faith is young. And your relationship is not that established and it's like a kid, then you may do those things, but really what is that. Prayer is a conversation with your father. That's the way you should see it.
The way I see it is a conversation. And when you have a normal conversation, it's sharing life. It's also through the conversations you learn about your father, right? You learn about his journey, right? Our own. Think about our own physical father. His journey of life that we didn't know when we were young, but as we grow old, they'll be like, oh, my dad went through this.
He went through the same struggles. Maybe he understands me better. And all being a father, only when we have children and we're a father ourselves to understand what a fuck. When thrown off. This one through. So that's the journey of understanding. You know what he's about, what are the things important to him? And then he loves me and I love my father. I want to do good right in front of my father.
I want to do the things that he thinks are important. And so that's an alignment process and the process of prayer is actually a process of us aligning ourselves to in Christian speakers God's will. Trying to understand God's will in my life because he created me and he has certain reasons why he sent me to this earth.
And so that's figuring that out. And understanding why I'm here. What's the purpose? What's the meaning? What are the most important things in my life? And the final thing is that at the end of my life, I'm not going to be able to take it. My riches, my house. And we're going to be gone. If I believe in eternal life, if I believe in I haven't or whatever that is. You should align with that. You should have that eternal perspective in your day-to-day life today. That prayer process is an important process for me to align to that.
Sharad lal: As you described it, it seemed like such an important process, even for people who are not too religious, such an important process too. Understand yourself and your values. and clarifying who you really are.
Sam Rhee: So that's when these foxes in the roads come you're clear about your purpose, about what you're meant to do, and your decision-making becomes a lot in line with your values. Absolutely. it doesn't matter whether it's a religion or a belief system, or, whether it's a worldview that you've created, that's, you just need alignment because the moment your life is misaligned. That's what causes unhappiness, stress and problems in your life and your relationships.
Sharad lal: Speaking with alignment. What brought about it? You started in Dallas. Yeah. Of course it's done so well in terms of The largest independent wealth platform in Asia, but what brought it about what was the issue and how did you go about it? Yeah.
Sam Rhee: Yeah. Yeah, I guess it goes back to the purpose and the meaning and why I felt I was brought into the financial service industry. And I keep saying financial service because we keep leaving out the woods service. We keep saying it's finances if it's an abstract term, but no, every single financial company is a financial service company and we are here to serve our clients.
And I think that is turned on its head. These days, clients are here to serve the companies and their shareholders. And We actually should be going back to our roots of trying to serve our clients. And that's where it comes from because I was a professional investor managing 10 billions of assets. I Get a lot of fever because I get served by great investment banks and brokers.
I give you good advice, access to great products and cost at a cost that is really low. GIC does not pay really high fees. They negotiate lower fees and get access to better products. And so that's what I felt was missing for individual investors. And I'd wanted to solve this problem of investing for individuals. But the most important thing is why do you invest. And one of the most important financial goals that every individual has is, if they realise they're struggling, and if they don't realise that it's a massive problem for them, that's gonna hit them at some point.
It's the problem of retirement. And how can we save enough for retirement? What we call retirement adequacy. This is a massive problem because what it leads to is this thing called old age poverty. Because people are going to walk all their lives, they realise at the end of the journey that Hey I'm not gonna be able to walk anymore. And I don't have enough money saved up. What does that mean? It means that the quality of life will suffer. And that's the biggest human tragedy you can imagine.
And so trying to find a way to solve that, obviously there is no silver bullet. We have to do what we can. And so Dallas is born from that mission of trying to make a dent. Help individuals empower them individuals and families to reach their most important financial goals over the long-term.
The reason we wanted to do that is because there is a right way to invest. There is a right way to do things and I don't think enough people know. And so on the supply side, we need to solve the problem as a financial service company. But on the demand side, we need to help individuals and empower them through financial education and improving financial literacy.
Sharad Lal: Thinking about how people should think about investments. From my personal journey, it was. Trying to do some cool stuff and make quick bucks doing boring compounding. Kind of instruments. What is your investment philosophy and how has that changed over the time?
Sam Rhee: So my journey began with me becoming a sophisticated professional investor, managing other people's money. And when I made my own money during that journey. I was managing my investments, personal investments in a very different way. From the institutional kind of professional money that I was running.
So I made the exact same mistakes. And mistakes everybody, every other retail investor makes. Which is, I go off to the hottest stock or the, my friend's recommendation or, I buy my friends like a startup. Invest in it. And I invest too much. And I blew my money. Those kinds of journeys have all happened. And so it was again, a process of alignment, right?
Like what I believe and what I do is a gap and therefore, how can I invest properly? My own personal money. Like I would manage my professional money. And that was the actual journey that allowed me to go in, to do what in Dallas is doing because in Dallas is all about aligning individuals to institutional frameworks of investing, right?
Using diversification using asset allocation, not trying to find the hottest, latest stock or tip. I'm not trying to generate 50% in two days. Yeah, which is the wrong incentive system. So there is a difference between saving and investing. So I want to start with a definitional thing. saving is really just putting aside money. saving means that you don't want to lose money.
And so you normally put it just in a fixed deposit or something very safe. What that means is that in this environment, people say, oh, you get a great interest rate of three, 4%. And before it was as low as one. Or below zero point something percent. But you have to understand interest rates are a reflection of inflation. Environment at the time.
So back then inflation was two and you're getting 0.8. 1% or less. So it was blue inflation. that value of the money is eroding every day in real terms. These days it's the same thing. Inflation was 6% and we're getting 3%, 4%.
And we're very happy that it's up from one. But actually inflation is six. So you're actually in minus three now, or minus two, which means that you're actually losing even more money, even though you're getting high interest. So you have to really understand the concept of, Purchasing power, the ability to, to what can you buy with the same amount of money in the future? The only way to protect the value of your money over the long term is to invest it. And when you invest as opposed to saving you are actually taking risk.
And because you're taking risk, you're asking that I need that to return or higher returns for taking that risk. And normally you are given higher returns, whether it's bonds, which are not riskier than fixed deposits, but safe. And therefore, as long as the company doesn't go bankrupt and you get your money back, you're generating five, 6% these days. And then you actually take on even more risk in the equity market and say, Hey, long-term equity markets gave you seven to 10%. But it's more volatile and it's more risky. So you allocate the right amount of money in the right risk bucket.
How much do I need to grow my pod in order that I can secure my retirement, buy a house, buy a car, send my kids to college. So you map it out from the other side, not the return side, your investment objectives should never be. I want to generate 10% or 20%.
It should be. What am I investing for? And then what is the risk I need to take to generate the returns I need. To meet that goal. So it's actually called a liabilities driven or goal-based investing process. And that is the way institutions do it.
And if you do well, then you can take less risk. If you do badly, like last year and this year markets are less. Friendly, then you actually up your wrist a little bit more because you know that over the long term. That this is the returns that you're expected to generate at that level of risk, but it's a very difficult concept because we are again, too shortsighted. And this is a bit about delayed gratification as well.
So it brings us back to that delayed gratification that, if you want to be a good investor, you have to be focused on delayed gratification because it's not about the short term. It's about the long term and over the long term taking the appropriate real risk we'll generate the right returns for you.
Shard Lal: What role do you think emotions play and how can we manage it?
Sam Rhee: Emotions while investing. Yeah. Emotions are critical. People talk about greed and fear. There's also a lot of comfort or stress depending on how the investment is doing. So emotions are very important and are an integral part of the investing process.
But what's more important is those emotions. All the other underlying drivers of how we behave. So we're driven by emotion to behave a certain way. And that's why there's a whole field.
These days of what's called behavioural economics. Where like the few people that actually won a Nobel. Economics prize on it, thinking fast, thinking slow. Daniel Cannon and then Richard Ella, or still won a Nobel prize on it and wrote a book. Not the easiest books to read, but you can write some read summaries.
And that is actually really fascinating, because for example we have biases. It's like cognitive biases that hinder us from being good investors. you'll learn a ton of it.
Risk aversion, a lot of biases that we have. And so that is helpful because we understand our own motivations. What drives markets? Is also a lot of behaviour. Any emotions behind it. And if we can remove certain biases that we have built Inside of us or things that come naturally to us, like we take too much risk and not get compensated for it.
We buy crypto and the latest like memes, stock, and hope that we generate 200%. That's not investing, that's gambling, trading and gambling, all this stuff. Speculation. Investing is really about trying to apply a tried and tested evidence-based scientific way of investing things that help you improve your chance of returns.
That's what scientific processes mean, right? Improve the chance of success, improve the chance of returns. And there are things that will help you get there. And financial advisers are there, especially if they can be independent. Not be paid by anybody else. And really working towards the client's best interest and then understanding the client's life circumstances and helping them behave in the right way by advising them in the right way. Those emotions can be overcome.
Sharad Lal: Very interesting. And I think like you said, people can look it up. There's lots of versions. There's So many concepts. Which we need to be aware of because. That'll help us. Absolutely. The funny thing is sometimes when we are aware of these. We keep making the same mistake again. So what are some of these common mistakes that we know that I don't want to make, but I keep making that you've seen people making? How do you break out of that loop?
Sam Rhee: They're all processes again. It's about discipline. It's about processes and systems and routines that you've put in place. And. One of the most common ones that people talk about is, this concept of dollar cost averaging. Or regular savings plan RSP. And to be honest with you, if you look at the long history of financial markets, And you put, pick any spot in the global stock market and say, Hey, was it better to pro. Put all your lump sum money, like your whole investments, even at the peak of a cycle, you put that money in. Versus dripping it in over a long period of time. The lump sum always wins. From a scientific mathematical conclusion. Like much, much higher probability and the majority of outcomes, if you invested a bigger lump sum earlier. Because of the way markets have gone over the past a hundred years.
And because it's a compounding nature, if you invested earlier, that's the most important thing you can do, even if it's a small amount, a lump sum earlier is better, but. There is an emotional risk and a massive kind of hindrance to us actually doing that because we worry that after we invest, we will lose money. We had this study about the worst investor in the whole history of mankind who invested at the peak of the market every decade. So this person saved up a hundred, that hypothetical person saved up a hundred thousand dollars. Four. A decade invested at the absolute peak of the 1970s.
As soon as he invested the market fell 50%. During the Nixon resignation oil embargo, et cetera. And then saved up all his money until the eighties and that was black Monday and it fell another 40% the next day. And that saves up another hundred thousand invested at the peak of the Dot com bubble bursting 99. And the market fell 50 something percent.
And then he saved up another hundred thousand invested in the global financial crisis. But if you look at that, the guy invested $500,000, he's made a 10 X return. Wow. And your average return annually is still eight, nine, 10%, depending on which period at the bottom of the global financial crisis, he would invest 400,000 and still would have been. Generating six, 7%. So the power of compounding and the power of markets itself, because the market is not just some random collection of. The copy place around the corner that closed down during COVID, it's actually the best companies in the world that have proven track record of profitability, have the best technology, the best talent, the best management, and. Have grown to be the biggest companies in the world.
And therefore the market is a representation of those good companies. And there's a natural mechanism through which bad companies become smaller. And the good company is going to grow and become a bigger portion of that market. And so it's a natural selection process and the markets as a result, long-term always go up. Over the long term. Not short term.
I told you about the decade every time, 30, 40, 50% last year, 20 something percent. But it's back up again this year. Who expected the markets to be up double digits this year? So, you have to understand what markets are. You know how it behaves and what are the things I can do to help myself succeed. And how can I overcome these fears and the behavioural biases that I have.
But the worst thing is what a lot of people do, which is you chase the market on the way up and you buy at the top and then you sell it at the bottom because you panic and you start selling when things are actually already down 20, 30, 50%.
And we actually want to avoid the worst outcomes, the bad mistakes we make. And we can't always do the most optimal thing, but dollar cost averaging is a process or regular savings as a process, through which we overcome our emotions, improve our behaviour. Which should, over time, improve our outcomes.
Sharaad Lal: It's such a wonderful point.
And I think the key takeaway is time, I remember reading somewhere about Warren buffet. Of course his investment philosophy is good, but one of the biggest reasons is he's been investing for six decades. Time.
Yes. And that's compounded and compounded everything. Absolutely. So there is a phrase time in the market, not timing the market. So that's a really good phrase to keep in mind because it's. The more time you have in your investment in the market is actually going to give you a better chance of success, timing the market like buying and selling and trading.
It reduces the probability of success. Okay, Sam, as we are closing out, thank you very much for sharing your wisdom. What's the one piece of advice that you would love to give people about investing?
Sam Rhee: You need to start getting going. There is an advantage. Of starting earlier. That's so important. And because of this thing called the power of compounding, starting earlier is the best thing you can do for yourself. If you have children that you can start investing for your children early on and have a separate pot, you can even do that with your CPF central Provident fund investments game. So all those things are things that you can do to get going really. You need to invest, not just save.
Sharad Lal: Absolutely. That's such powerful advice. Dawning a little bit to the personal bit before we go off. We talked about purpose.
We talked about life. I had this question that I asked many people and I thought, let me ask you as well. At the end of your life, how would you know you've lived a good life?
Sam Rhee: Okay. This there's two ways to look at it. Who are you living for? I live for. I Say, this is the thing I can't not bring in religion. Something like this. And yeah, so I live for my God and for my family and for my friends. And so all of those things what's consistent are not the religious part or other things.
It actually is all driven by relationships. My life is for me all about my relationships. That's what I value the most. And so meeting a new Shirad is about developing a relationship with you. Getting to know each other, understanding each other, learning from each other. So that relationship is critical.
Employee is more important than me succeeding with my company is more important than me making money. I think these relationships are the foundations of my happiness and also my success. So at the end of my life, I want to take stock of my relationships. One of the things that I've done well is what are the relationships that matter?
What are the relationships that have stayed with me and have really helped me succeed in life and the way that I value it. And the most important relationship is the audience of one of God for me as well. And so God family, friends, It's all about relationships for me.
Sharad Lal: What a wonderful perspective, Sam.
Thank you very much for spending time with us. It's been a complete privilege having you on the show. And I'm sure many people listening will learn so much, not only about investing, but about how to live their lives. So thank you very much for sharing your wisdom with us.
Sam Rhee: Thank you so much, Sharad. It's really a real pleasure. And, I don't know if I did everything you say that I did, just sharing my life and what I've learned is a joy. Yeah. Thank you so much for having me. Thank you.
Sharad Lal: Thank you, Sam, for such a beautiful and useful conversation. For more on Sam, you can reach him on LinkedIn. I will put up a link.
He has an action step for all of us. What does prayer mean to you? Do you pray? How has it evolved over time? What can prayer do to you? How can it be a tool to align yourself with your values? How can you bring in your religious beliefs in helping you become who you really are and who you're meant to be? I think prayer is such an important aspect in self exploration.
So as an action step for this episode, let's all think about our prayers. And what we can do to make it a more important part in our life. Best of luck. I hope you enjoyed this episode. The next episode will drop two weeks from now on December 5th. To join us for that Didn't next time have a wonderful day ahead bye bye