André Massaro, a business administrator with a postgraduate degree in Economics, is the guest of the third episode of MoneyPlay Podcast, a program created to shed light on the world of finance, presented by financial educators Carol Stange and Fabricio Duarte.
In the interview, Massaro, who is also a finance professor at B3 Educação and the author of five books on finance and investments, tells about the beginning of his career, working as a trader and working with financial education.
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Massaro says that, at the end of his graduation, there were two possibilities for specialization – Marketing or Finance. “But I was too dumb to do Marketing”, he jokes. For him, the Marketing professional has the ability to put himself in the shoes of the client, the buyer, which he had difficulties, so Finance was the only possible choice.
After his experience as an executive in a small multinational, Massaro became a trader (investor in the financial market that seeks to make money with short-term operations) and made a living from this profession for almost six years. At that time, a landmark event was when he took his first five-figure loss in 2006.
“I was acting without method or technique, so I made four consecutive operations that generated my loss. Although I already have a lot of experience in finance as a professional, I was just starting out and it’s different when you own the money”, he says. “I didn’t realize it until the end of the day and I was stunned for a while, but it never came close to breaking.”
This story defined what he would do from then on. “I became an obsessive subject with risk management and that is why I became a skeptical investor”, he says. But the beginning of the new profession was not easy. “I thought it would be ok, but I saw that I was wrong, because in the world of personal finance, what there is less is finance”, he justifies.
For the professor, 99% of people’s financial problems are not solved with money. “If they put money in and the problem didn’t go away, it was just a painkiller: it took away the pain, but the disease continues”, he compares. He links almost all financial problems to psychological issues, logical flaws in reasoning, behavior and even moral problems.
And, for a financial education professional to be successful, Massaro believes he needs to have his education side stronger than his finance side. “What is not lacking in the world is people who have all the knowledge of finance and, even so, live with a messy life.”
The reason? “People want quick answers, ease, tips, but this is not a financial problem”, he says. “It’s like someone who wants to lose 30 kg in two weeks and is willing to do anything as long as someone says what she wants to hear.”
And when someone asks for this “shortcut” to Massaro, his recommendation is simply to deny it. “Those who give tips don’t know. He wants to invest, study, learn, know how to make his own analyses”, he advises. If they insist, the teacher’s response is harsh but good-humored: “Ask your dog.”
To choose his investments, Massaro follows critical thinking – techniques for evaluating arguments for logical flaws. For him, most of the financial problems happen due to a lack of skepticism, both from those who spend on their own, as well as from people who believe in things they read on social networks.
“There are people losing their entire life savings because of tips from those who act as if the stock market were a casino”, he says. “There are a lot of people and hack courses dressing up in financial education, such as direct sales of products and services that most of the time are irrelevant or even harmful to the person.”
Why do we fail?
Even with so much access to information, people still have a hard time saving money. The answer, according to Massaro, lies in our Paleolithic ancestors. “We are not made to think long term. And it’s not just money, but everything.”
The professor says that most of the things people want to do go wrong because there are conflicting goals in the short and long term. “Millenniums of evolution have forged us as beings who think in the short term, in immediate pleasure”, he adds.
For Massaro, the simplest and most effective tool for risk management is the diversification of the investment portfolio. “Everyone will make mistakes at some point and diversification limits the impact of a mistake, ‘spreading’ investments strategically.”
He uses a practical example to show the importance of varying investments: “a person who has five bank stocks in his portfolio, even if they are from different institutions, is diversifying, but a bad diversification, as they are similar companies. In practice, it’s like investing in one thing.”
For the finance professor, a safe portfolio in Brazil would have at least two shares of different companies from 10 different sectors. But he points out that efficiency and risk management don’t mix. “An investor who manages risk is necessarily inefficient,” he says.
“Efficiency is maximizing the gain, but if you take a stock with 99.9% confidence that it will go up and put everything in it, but if the market stays at 0.01%, you’re broke,” explains Massaro. He compares it to car insurance: it’s not efficient to have, as you could put the money into something else, but it manages the risk of a claim.
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